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Paper oil, Minsky financial instability hypothesis and casino capitalism

 Why Peak Oil Threatens the Casino Capitalism

News Peak Cheap Energy and Oil Price Slump Recommended Links The idea of Minsky moment Oil glut fallacy Neoliberalism as a New Form of Corporatism Great condensate con
Paper oil and record oil futures trading volumes Oil prices and debt bubble Slightly skeptical view of oil price forecasts        
Russia oil production Deflation of the USA shale oil bubble MSM propagated myth about Saudis defending this market share Iran return to western oil markets fearmongering

Slightly skeptical view of oil price forecasts

 

Oil consumption growth Secular Stagnation
 Energy returned on energy invested (ERoEI) Energy Geopolitics Energy Bookshelf Bakken Reality Check Junk bond bubble Energy disinformation agency and friends US military energy consumption
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Note: This article sounds pretty counterintuitive in view of current slump of oil prices with a barrel of oil prices below $30 (more then 4 times drop from the highest level achieved.), In other words, instead of peak oil temporary the world is living in the regime of "oil glut" (which is a misnomer, as in reality this is an overproduction of condensate not oil, but at least low prices are real). 

But the key reason for this was extremely rapid increase  of production in the US and Canada in 2012-2014 fueled by cheap credit. Essentially producing "subprime oil" and in parallel the stream of junk bonds that will never be repaid (aka subprime oil as a Ponzi scheme).

At the same time this was not a revolution but a retirement party as fundamental did not change -- abundance of credit for shale oil and tar sand project was just a side effect of QE.

Reprinted from: Commentary: Why Peak Oil Threatens the International Monetary System By Erik Townsend

| January 6, 2013 (Note: Commentaries do not necessarily represent the position of ASPO-USA. )

Introduction

Having spent the last several years of my life engineering investment strategies to profit from the inevitability of Peak Oil, I’ve become obsessed with understanding the ramifications of radically different energy supply dynamics on the global economy. There are many facets to this, some obvious and some not so obvious. So when ASPO-USA Executive Director Jan Mueller approached me at the end of this year’s conference in Austin and asked for an article discussing the less obvious economic impacts of Peak Oil, I knew instantly that the topic should be the threat Peak Oil poses to the International Monetary System (IMS). This connection is critically important, but far from obvious.

I assure you that this story is very much about Peak Oil, but please bear with me, as I’ll need to start by reviewing what the IMS is and how it came about in the first place. Then I’ll explain the role energy has already played in shaping the present-day IMS, and finally, I’ll tie this back to Peak Oil by explaining why rising energy prices could very well be the catalyst that will cause the present system to fail.

What is the International Monetary System?

At the end of World War II, many countries were literally lying in ruin, and needed to be rebuilt. It was clear that international trade would be very important going forward, but how would it work? World leaders recognized the need to architect a new monetary system that would facilitate international trade and allow the world to rebuild itself following the most devastating war in world history.

A global currency was out of the question because the many countries of the world valued their sovereignty, and wanted to continue to issue their own domestic currencies. In order for international trade to flourish, a system was needed to allow trade between dozens of different nations, each with its own currency.

A convention was organized by the United Nations for the purpose of bringing world leaders together to architect this new International Monetary System. The meetings were held in July, 1944 at the Mt. Washington Hotel in Bretton Woods, New Hampshire, and were attended by 730 delegates representing all 44 allied nations. The official name for the event was the United Nations Monetary and Financial Conference, but it would forever be remembered as The Bretton Woods Conference.

To this day, the system designed in those meetings remains the basis for all international trade, and is known as the Bretton Woods System. The system has evolved quite a bit since its inception, but its core principles remain the basis for all international trade. I’m going to focus this article on the parts of the system which I believe are now at risk of radical change, with Peak Oil the most likely catalyst to bring about that change. Readers seeking a deeper understanding of the system itself should refer to the Further Reading section at the end of this article.

Why is an International Monetary System needed?

It simply wouldn’t be practical for all countries to sell their export products to other countries in their own currencies. If one had to pay for wine from France in French Francs (there was no Euro currency in 1944), and then pay to import a BMW automobile in German Marks, then pay for copper produced in Chile in Pesos, each country would face an overwhelming burden just maintaining reserve deposits of all the various world currencies. The system of trade would be very inefficient. For centuries, this problem has been solved by using a single standard currency for all international trade.

Because a standard-currency system dictates that each nation’s central bank will need to maintain a reserve supply of the standard currency in order to facilitate international trade, the standard currency is known as the reserve currency. At various times in history, the Greek Drachma, the Roman Denari, and the Islamic Dinar have served as de-facto reserve currencies. Prior to World War II, the English Pound Sterling was the international reserve currency.

Throughout history, reserve currencies came into and out of use through happenstance. The Bretton Woods conference marked the first time that a global reserve currency was established by formal treaty between cooperating nations. The currency chosen was, of course, the U.S. Dollar.

How does the IMS work?

The core of the system was the U.S. Dollar serving as the standard currency for international trade. To assure other nations of the dollar’s value, the U.S. Treasury would guarantee that other nations could convert their U.S. dollars into gold bullion at a fixed exchange rate of $35/oz. Other nations would then “peg” their currencies to the U.S. dollar at a fixed rate of exchange. Each nation’s central bank would be responsible for “defending” the official exchange rate to the U.S. dollar by offering to buy or sell any amount of currency bid or offered at that price. This meant each nation would need to keep a healthy reserve of U.S. dollars on hand to service the needs of domestic businesses wishing to convert money between the local currency and the U.S. dollar.

By design, the effect of the system was that each national currency was indirectly redeemable for gold. This was true because each nation’s central bank guaranteed convertibility of its own currency to U.S. dollars at some fixed rate of exchange, and the U.S. Treasury guaranteed convertibility of U.S. dollars to gold at a fixed rate of $35/oz. So long as all of the governments involved kept their promises, each nation’s domestic currency would be as good as gold, because it was ultimately convertible to gold. United States President Richard Nixon would break the most central promise of the entire system (U.S. dollar convertibility for gold) on August 15, 1971. I’ll come back to that event later in this article.

Triffin’s Dilemma

In 1959, three years after M. King Hubbert’s now-famous Peak Oil predictions, economist Robert Triffin would make equally prescient predictions about the sustainability of the “new” IMS, which was then only 15 years old. Sadly, Triffin’s predictions, like Hubbert’s, would be ignored by the mainstream.

The whole reason for choosing the U.S. dollar as the global reserve currency was that without a doubt, the U.S.was the world’s strongest credit in 1944. To assure confidence in the system, the strongest, most creditworthy currency on earth was chosen to serve as the standard unit of account for global trade. To eliminate any question about the value of the dollar, the system was designed so that any international holder of U.S. dollars could convert those dollars to gold bullion at a pre-determined fixed rate of exchange. Dollars were literally as good as gold.

Making the USD the world’s reserve currency created an enormous international demand for more dollars to meet each nation’s need to hold a reserve of dollars. The USA was happy to oblige by printing up more greenbacks. This provided sufficient dollars for other nations to hold as foreign exchange reserves, while at the same time allowing the U.S.to spend beyond its means without facing the same repercussions that would occur were it not the world’s reserve currency issuer.

Triffin observed that if you choose a currency because it’s a strong credit, and then give the issuing nation a financial incentive to borrow and print money recklessly without penalty, eventually that currency won’t be the strongest credit any more! This paradox came to be known as Triffin’s Dilemma.

Specifically, Triffin predicted that as issuer of the international reserve currency, the USA would be prone to over consumption, over-indebtedness, and tend toward military adventurism. Unfortunately, the U.S. Government would prove Triffin right on all three counts.

Triffin correctly predicted that the USA would eventually be forced off the gold standard. The international demand for U.S. dollars would allow the USA to create more dollars than it otherwise could have without bringing on domestic inflation. When a country creates too much of its own currency and that money stays in the country, supply-demand dynamics kick in and too much money chasing too few goods and services results in higher prices. But when a country can export its currency to other nations who have an artificial need to hold large amounts of that currency in reserve, the issuing country can create far more money than it otherwise could have, without causing a tidal wave of domestic inflation.

Nixon proves Triffin right

By 1970, the U.S.had drastically over-spent on the Vietnam War, and the number of dollars in circulation far outnumbered the amount of gold actually backing them. Other nations recognized that there wasn’t enough gold in Fort Knox for the U.S.to back all the dollars in circulation, and wisely began to exchange their excess USDs for gold. Before long, something akin to a run on the bullion bank had begun, and it became clear that the USA could not honor the $35 conversion price indefinitely.

On August 15, 1971, President Nixon did exactly what Triffin predicted more than a decade earlier: he declared force majeure, and defaulted unilaterally on the USA’s promise to honor gold conversion at $35/oz, as prescribed by the Bretton Woods accord.

Of course Nixon was not about to admit that the reason this was happening was that the U.S. Government had abused its status as reserve currency issuer and recklessly spent beyond its means. Instead, he blamed “speculators”, and announced that the United States would suspend temporarily the convertibility of the Dollar into gold. Forty-two years later, the word temporarily has taken on new meaning.

Exorbitant Privilege

With the whole world conducting international trade in U.S. dollars, nations with large export markets wound up with a big pile of U.S. dollars (payments for the goods they exported). The most obvious course of action for the foreign companies who received all those dollars as payment for their exported products would be to exchange the dollars on the international market, converting them into their own domestic currencies. What may not be obvious at first glance is that there would be catastrophic unintended consequences if they actually did that.

If all the manufacturing companies in Japan or China converted their dollar revenues back into local currency, the act of selling dollars and buying their domestic currencies would cause their own currencies to appreciate markedly against the dollar. The same holds true for oil exporting countries. If they converted all their dollar revenues back into their own currencies, doing so would make their currencies more expensive against the dollar. That would make their exports less attractive because, being priced in dollars, they would fetch lower and lower prices after being converted back into the exporting nation’s domestic currency.

The solution for the exporting nations was for their central banks to allow commercial exporters to convert their dollars for newly issued domestic currency. The central banks of exporting nations would wind up with a huge surplus of U.S. dollars they needed to invest somewhere without converting them to another currency. The obvious place to invest them was into U.S. Government Bonds.

This is the mechanism through which the reserve currency status of the dollar creates artificial demand for U.S. dollar-denominated treasury debt. That artificial demand allows the United States government to borrow money from foreigners in its own currency, something most nations cannot do at all. What’s more, this artificial demand for U.S. Treasury debt allows the USA to borrow and spend far more borrowed foreign money than it would otherwise be able to, were it not the world’s reserve currency issuer. The reason is that, if not for the artificial need to hold dollar reserves, foreign lenders would be much less inclined to purchase U.S. debt, and would therefore demand much higher interest rates. Similarly, the more that international trade has grown as a result of globalization, the more the United States’ exorbitant privilege has grown.

Have you ever wondered why China, Japan, and the oil exporting nations have such enormous U.S. Treasury bond holdings, despite the fact that they hardly pay any interest these days? The reason is definitely not because those nations think 1.6% interest on a 10-year unsecured loan to a nation known to have a reckless spending habit is a good investment. It’s because they have little other choice. The more their own economies rely on exports priced in dollars, the more they need to keep their own currencies attractively priced relative to the U.S. dollar in order for their exports to remain competitive on the international market. To achieve that outcome, they must hold large reserves denominated in U.S. dollars. That’s why China and Japan – major export economies – are the biggest foreign holders of U.S. debt.

The net effect of this system is that the USA gets to borrow money from foreigners at artificially low interest rates. Moreover, the USA can become over-indebted without the usual consequences of increasing borrowing cost and declining creditworthiness. Other nations have little choice but to maintain a large reserve supply of dollars as the international trade currency. But the U.S. has no need to maintain large reserves of other nations’ currencies, because those currencies are not used in international trade.

By the mid-1960s, this phenomenon became known as exorbitant privilege: That phrase refers to the ability of the USA to go into debt virtually for free, denominated in its own currency, when no other nation enjoys such a privilege. The phrase exorbitant privilege is often attributed to French President Charles de Gaulle, although it was actually his finance minister, Valery Giscard d’Estaing, who coined the phrase.

What’s important to understand here is that the whole reason the U.S. can get away with running trillion-dollar budget deficits without the bond market revolting (a la Greece) is because of exorbitant privilege. And that privilege is a direct consequence of the U.S. dollar serving as the world’s reserve currency. If international trade were not conducted in dollars, exporting nations (both manufacturers and oil exporters) would no longer need to hold large reserves of U.S. dollars.

Put another way, when the U.S. dollar loses its reserve currency status, the U.S. will lose its exorbitant privilege of spending beyond its means on easy credit. The U.S. Treasury bond market will most likely crash, and borrowing costs will skyrocket. Those increased borrowing costs will further exacerbate the fiscal deficit. Can you say self-reinforcing vicious cycle?

But wait… Wasn’t Gold convertibility the whole basis of the system?

If the whole point of the Bretton Woods system was to guarantee that all the currencies of the world were “as good as gold” because they were convertible to U.S. dollars, which in turn were promised to be convertible into gold… And then President Nixon broke that promise in 1971… Wouldn’t that suggest that the whole system should have blown up in reaction to Nixon slamming the gold window shut in August of ’71?

Actually, it almost did. But miraculously, the system has held together for the last 42 years, despite the fact that the most fundamental promise upon which the system was based no longer holds true. To be sure, the Arabs were not happy about Nixon’s action, and they complained loudly at the time, rhetorically asking why they should continue to accept dollars for their oil, if those dollars were not backed by anything, and might just become worthless paper. After all, if U.S. dollars were no longer convertible into gold, what value did they really have to foreigners? The slamming of the gold window by President Nixon in 1971 was not the only cause of the Arab oil embargo, but it was certainly a major influence.

What’s holding the IMS together?

Why didn’t the rest of the world abandon the dollar as the global reserve currency in reaction to the USA unilaterally reneging on gold convertibility in 1971? In my opinion, the best answer is simply “Because there was no clear alternative”. And to be sure, the unmatched power of the U.S.military had a lot to do with eliminating what might otherwise have been attractive alternatives for other nations.

U.S. diplomats made it clear to Arab leaders that they wanted the Arabs to continue pricing their oil in dollars. Not just for U.S.customers, but for the entire world. Indeed, U.S. leaders at the time understood all too well just how much benefit the USA derives from exorbitant privilege, and they weren’t about to give it up.

After a few years of tense negotiations including the infamous oil embargo, the so-called petro-dollar business cycle was born. The Arabs would only accept dollars for their oil, and they would re-invest most of their profits in U.S. Treasury debt. In exchange for this concession, they would come under the protectorate of the U.S. military. Some might even go so far as to say that the U.S. government used the infamous Mafia tactic of making the Arabs an “offer they couldn’t refuse” – forcing oil producing nations to make financial concessions in exchange for “protection”.

With the Arabs now strongly incented to continue pricing the world’s most important commodity in U.S. dollars, the Bretton Woods system lived on. No longer constrained by the threat of a run on its bullion reserves, the U.S. kicked its already-entrenched practice of borrowing and spending beyond its means into high gear. For the past 42 years, the entire world has continued to conduct virtually all international trade in Dollars. This has forced China, Japan, and the oil exporting nations to buy and hold an enormous amount of U.S. Treasury debt. Exorbitant privilege is the key economic factor that allows the U.S.to run trillion dollar fiscal deficits without crashing the Treasury bond market. So far.

There’s a limit to how long this can last

But how long can this continue? The U.S.debt-to-GDP ratio now exceeds 100%, and the U.S. has literally doubled its national debt in the last 6 years alone. It stands to reason that eventually, other nations will lose faith in the dollar and start conducting business in some other currency. In fact, that’s already started to happen, and it’s perhaps the most important, under-reported economic news story in all of history.

Some examples…China and Brazil are now conducting international trade in their own currencies, as are Russia and China. Turkey and Iran are trading oil for gold, bypassing the dollar as a reserve currency. In that case, US sanctions are a big part of the reason Iran can’t sell its oil in dollars. But I wonder if President Obama considered the undermining effect on exorbitant privilege when he imposed those sanctions. I fear that the present U.S. government doesn’t understand the importance of the dollar’s reserve currency role nearly as well as our leaders did in the 1970s.

The Biggest Risk We Face is a US Bond and Currency Crisis

To be sure, Peak Oil in general represents a monumental risk to humanity because it’s literally impossible to feed all 7+ billion people on the planet without abundant energy to run our farming equipment and distribution infrastructure. But the risks stemming directly from declining energy production are not the most imposing, in my view.

Decline rates will be gradual at first, and it will be possible, even if unpopular, to curtail unnecessary energy consumption and give priority to life-sustaining uses for the available supply of liquid fuels. In my opinion, the greatest risks posed by Peak Oil are the consequential risks. These include resource wars between nations, hoarding of scarce resources, and so forth. Chief among these consequential risks is the possibility that the Peak Oil energy crisis will be the catalyst to cause a global financial system meltdown. In my opinion, the USA losing its reserve currency status is likely to be at the heart of such a meltdown.

A good rule of thumb is that if something is unsustainable and cannot continue forever, it will not continue forever. The present incarnation of the IMS, which affords the United States the exorbitant privilege of borrowing a seemingly limitless amount of its own currency from foreigners in order to finance its reckless habit of spending beyond its means with trillion-dollar fiscal deficits, is a perfect example of an unsustainable system that cannot continue forever.

But the bigger the ship, the longer it takes to change course. The IMS is the biggest financial ship in the sea, and miraculously, it has remained afloat for 42 years after the most fundamental justification for its existence (dollar-gold convertibility) was eliminated. How long do we have before the inevitable happens, and what will be the catalyst(s) to bring about fundamental change? Those are the key questions.

In my opinion, the greatest risk to global economic stability is a sovereign debt crisis destroying the value of the world’s reserve currency. In other words, a crash of the U.S. Treasury Bond market. I believe that the loss of reserve currency status is the most likely catalyst to bring about such a crisis.

The fact that the United States’ borrowing and spending habits are unsustainable has been a topic of public discussion for decades. Older readers will recall billionaire Ross Perot exclaiming in his deep Texas accent, “A national debt of five trillion dollars is simply not sustainable!” during his 1992 Presidential campaign. Mr. Perot was right when he said that 20 years ago, but the national debt has since more than tripled. The big crisis has yet to occur. How is this possible? I believe the answer is that because the U.S. dollar is the world’s reserve currency and is perceived by institutional investors around the globe to be the world’s safest currency, it enjoys a certain degree of immunity derived from widespread complacency.

But that immunity cannot last forever. The loss of reserve currency status will be the forcing function that begins a self-reinforcing vicious cycle that brings about a U.S. bond and currency crisis. While many analysts have opined that the USA cannot go on borrowing and spending forever, relatively few have made the connection to loss of reserve currency status as the forcing function to bring about a crisis.

We’re already seeing small leaks in the ship’s hull. China openly promoting the idea that the yuan should be asserted as an alternative global reserve currency would have been unthinkable a decade ago, but is happening today. Major international trade deals (such as China and Brazil) not being denominated in US dollars would have been unthinkable a decade ago, but are happening today.

So we’re already seeing signs that the dollar’s exclusive claim on reserve currency status will be challenged. Remember, when the dollar loses reserve currency status, the U.S.loses exorbitant privilege. The deficit spending party will be over, and interest rates will explode to the upside. But to predict that this will happen right now simply because the system is unsustainable would be unwise. After all, by one important measure the system stopped making sense 42 years ago, but has somehow persisted nonetheless. The key question becomes, what will be the catalyst or proximal trigger that causes the USD to lose reserve currency status, igniting a U.S. Treasury Bond crisis?

Elevated Risk

It’s critical to understand that the USA is presently in a very precarious fiscal situation. The national debt has more than doubled in the last 10 years, but so far, there don’t seem to have been any horrific consequences. Could it be that all this talk about the national debt isn’t such a big deal after all?

The critical point to understand is that while the national debt has more than doubled, the U.S. Government’s cost of borrowing hasn’t increased at all. The reason is that interest rates are less than half what they were 10 years ago. Half the interest on twice as much principal equals the same monthly payment, so to speak. This is exactly the same trap that subprime mortgage borrowers fell into. First, money is borrowed at an artificially low interest rate. But eventually, the interest rate increases, and the cost of borrowing skyrockets. The USA is already running an unprecedented and unsustainable $1 trillion+ annual budget deficit. All it would take to double the already unsustainable deficit is for interest rates to rise to their historical norms.

This all comes back to exorbitant privilege. The only reason interest rates are so low is that the Federal Reserve is intentionally suppressing them to unprecedented low levels in an attempt to combat deflation and resuscitate the economy. The only reason the Fed has the ability to do this is that foreign lenders have an artificial need to hold dollar reserves because the USD is the global reserve currency. They would never accept such low interest rates otherwise. Loss of reserve currency status means loss of exorbitant privilege, and that in turn means the Fed would lose control of interest rates. The Fed might respond by printing even more dollars out of thin air to buy treasury bonds, but in absence of reserve currency status, doing that would cause a collapse of the dollar’s value against other currencies, making all the imported goods we now depend on unaffordable.

In summary, the U.S. Government has repeated the exact same mistake that got all those subprime mortgage borrowers into so much trouble. They are borrowing more money than they can afford to pay back, depending solely on “teaser rates” that won’t last. The U.S. Government’s average maturity of outstanding treasury debt is now barely more than 5 years. This is analogous to cash-out refinancing a 30-year fixed mortgage, replacing it with a much higher principal balance in a 3-year ARM that offers an initial teaser rate. At first, you get to borrow way more money for the same monthly payment. But eventually the rate is adjusted, and the borrower is unable to make the higher payments.

The Janszen Scenario

When it comes to evaluating the risk of a U.S. sovereign debt and currency crisis, most mainstream economists dismiss the possibility out of hand, citing the brilliant wisdom that “the authorities would never let such a thing happen”. These are the same people who were steadfastly convinced that housing prices would never crash in the United States because they never had before, and that Peak Oil is a myth because the shale gas boom solves everything (provided you don’t actually do the math).

At the opposite extreme are the bloggers on the Internet whom I refer to as the Hyperinflation Doom Squad. Their narrative generally goes something like this: Suddenly, when you least expect it, foreigners will wise up and realize that the U.S. national debt cannot be repaid in real terms, and then there will be a panic that results in a crash of the U.S. Treasury market, hyperinflation of the U.S. dollar, and declaration of martial law. This group almost always cites the hyperinflations of Zimbabwe and Argentina as “proof” of what’s going to happen in the USA any day now, but never so much as acknowledges the profound differences in circumstances between the USA and those countries. These folks deserve a little credit for having the right basic idea, but their analysis of what could actually happen simply isn’t credible when examined in detail.

Little-known economist Eric Janszen stands out as an exception. Janszen is the only credible macroeconomic analyst I’m aware of who realistically acknowledges just how real and serious the threat of a U.S. sovereign debt crisis truly is. But his analysis of that risk is based on credible, level-headed thinking complemented by solid references to legitimate economic theory such as Triffin’s Dilemma. Unlike the Doom Squad, Janszen does not rely on specious comparisons of the USA to small, systemically insignificant countries whose past financial crises have little in common with the situation the USA faces. Instead, Janszen offers refreshingly sound, well constructed arguments. Many of the concepts discussed in this article reflect Janszen’s work.

Janszen also happens to be the same guy who coined the phrase Peak Cheap Oil back in 2006, drawing an important distinction between the geological phenomenon of Hubbert’s Peak and the economic phenomenon which begins well before the actual peak, due to increasing marginal cost of production resulting from ever-increasing extraction technology complexity.

“But there’s no sign of inflation…” (Hint: It’s coming)

Janszen has put quite a bit of work into modeling what a U.S. bond and currency crisis would look like. He initially called this KaPoom Theory, because history shows that brief periods of marked deflation (the ‘Ka’) usually precede epic inflations (the ‘Poom’). He recently renamed this body of work The Janszen Scenario.

Briefly summarized, Janszen’s view is that the U.S. has reached the point where excessive borrowing and fiscal irresponsibility will eventually cause a catastrophic currency and bond crisis. He believes that all that’s needed at this point is a proximal trigger, or catalyst, to bring about such an outcome. He thinks there are several potential triggers that could bring such a crisis about, and chief among the possibilities is the next Peak Cheap Oil price spike.

How Peak Oil could cause a Bond and Currency Crisis

There are several ways that an oil price spike could trigger a U.S. bond and currency crisis. Energy is an input cost to almost everything else in the economy, so higher oil prices are very inflationary. The Fed would be hard pressed to continue denying the adverse consequences of quantitative easing in a high inflation environment, and that alone could be the spark that leads to higher treasury yields. The resulting higher cost of borrowing to finance the national debt and fiscal deficit would be devastating to the United States.

A self-reinforcing vicious cycle could easily begin in reaction to oil price-induced inflation alone. But we must also consider how an oil price shock could lead to loss of USD reserve currency status, and therefore, loss of U.S. exorbitant privilege. In the 1970s, the USA represented 80% of the global oil market. Today we represent 20%, and demand growth is projected to come primarily from emerging economies. In other words, the rationale for oil producers to keep pricing their product in dollars has seriously deteriorated since the ‘70s. The more the global price of oil goes up, the more the U.S. will source oil from Canadian tar sands and other non-OPEC sources. That means less and less incentive for the OPEC nations to continue pricing their oil in dollars for all their non-U.S. customers.

Iran and Turkey have already begun transacting oil sales in gold rather than dollars. What if the other oil exporting nations wake up one morning and conclude “Hey, why are we selling our oil for dollars that might some day not be worth anything more than the paper they’re printed on?” Oil represents a huge percentage of international trade, so if oil stopped trading in dollars, that alone would be reason for most nations to reduce the very large dollar reserves they now hold. They would start selling their U.S. treasury bonds, and that could start the vicious cycle of higher interest rates and exploding borrowing costs for the U.S. Government. The precise details are hard to predict. The point is, the system is already precarious and vulnerable, and an oil price shock could easily detonate the time bomb that’s already been ticking away for more than two decades.

What if U.S. Energy Independence claims were true?

There’s another angle here. Peak Oil just might be the catalyst to cause the loss of U.S. exorbitant privilege, even without an oil price shock.

Astute students of Peak Oil already know better than to believe the recently-popularized political rhetoric claiming that the USA will soon achieve energy independence, thanks to the shale oil and gas boom. To be sure, the Bakken, Eagle Ford, and various other U.S. oil and gas plays are a big deal. The most optimistic forecasts I’ve seen show these plays collectively ramping up to as much as 4.8 million barrels per day of production, which is equivalent to about ½ of Saudi Arabia’s current production.

But the infamous “wedge of hope” chart from the EIA projects production declines from existing global resources of 60 million barrels per day by 2030. By the most optimistic projections, all the exciting new plays in the U.S. will replace less than 5 million barrels per day. Where the other 55 million barrels per day will come from remains a mystery! And of course the politicians never bother to mention such minor details when they make predictions of energy independence.

But let’s just pretend for a moment that hyperbole is reality, and that the USA will achieve energy-independence in just a few years’ time. Now consider the consequences to the IMS. The oil-exporting nations would lose the USA as their primary export customer, and would no longer have an incentive to price their oil in dollars, or to maintain large dollar reserves. They would start selling off their U.S. treasury bonds, and pricing their oil in something other than dollars. Large oil importers like China and Japan would stop paying for oil in dollars, and would no longer need to maintain present levels of U.S. dollar reserves. So they too would start selling U.S. treasury bonds, pushing up U.S. interest rates in the process. Once again, we have the ingredients for a self-reinforcing vicious cycle of increasing U.S. interest rates causing U.S. Government borrowing costs to skyrocket.

Without the artificial demand for treasury debt created by exorbitant privilege, the U.S. would be unable to finance its federal budget deficit. The Federal Reserve might respond with even more money printing to monetize all the government’s borrowing needs, but without the international demand that results from the dollar’s reserve currency status, the dollar would crash in value relative to other currencies as a result of excessive monetization by the Fed. The resulting loss of principal value would cause even more international holders of U.S. Treasury debt to panic and sell their holdings. Once again, a self-reinforcing vicious cycle would develop, with consequences for the United States so catastrophic that the 2008 event would pale in contrast.

Rambo to the Rescue?

Let’s not forget that the USA enjoys virtually unchallenged global military hegemony. China is working hard to build out its “blue water navy”, including strategic ballistic missile nuclear submarine capability. But the USA is still top dog on the global power stage, and if the USA was willing to use its nuclear weapons, it could easily defeat any country on earth, except perhaps China and Russia.

While the use of nuclear weapons in an offensive capacity might seem unthinkable today, the USA has yet to endure significant economic hardship. $15/gallon gasoline from the next Peak Cheap Oil price shock coupled with 15% treasury yields and a government operating in crisis mode just to hold off systemic financial collapse in the face of rampant inflation would change the mood considerably.

All the USA has to do in order to secure an unlimited supply of $50/bbl imported oil is to threaten to nuke any country refusing to sell oil to the U.S. for that price. Unthinkable today, but in times of national crisis, morals are often the first thing to be forgotten. We like to tell ourselves that we would never allow economic hardship to cause us to lose our morals. But just look at the YouTube videos of riots at Wal-Mart over nothing more than contention over a limited supply of boxer shorts marked down 20% for Black Friday. What we’ll do in a true crisis that threatens our very way of life is anyone’s guess.

If faced with the choice between a Soviet-style economic collapse and abusing its military power, the USA just might resort to tactics previously thought unimaginable. Exactly what those tactics might be and how it would play out are unknowable. The point is, this is a very complex problem, and a wide array of factors including military capability will play a role in determining the ultimate outcome.

I certainly don’t mean to predict such an apocalyptic outcome. All I’m really trying to say is that the military hegemony of the USA will almost certainly play into the equation. Even if there is no actual military conflict, the ability of the U.S. to defeat almost any opponent will play into the negotiations, if nothing else.

Conclusions

The current incarnation of the International Monetary System, in which the USA enjoys the exorbitant privilege of borrowing practically for free, and is therefore able to pursue reckless fiscal policy with immunity from the adverse consequences that non-reserve currency issuing nations would experience by doing so, cannot continue indefinitely. Therefore, it will not continue indefinitely. How and when it will end is hard to say, especially considering the fact that it’s already persisted for 42 years after it stopped making sense. The system will continue to operate until some catalyst or trigger event brings about catastrophic change.

The next Peak Cheap Oil price spike is not the only possible catalyst to bring about a U.S. bond and currency crisis, but it’s the most likely candidate I’m aware of. I don’t believe that U.S. energy independence is possible, but if it were, the end of oil imports from the Middle East would also be the catalyst to end exorbitant privilege and bring about a U.S.bond and currency crisis. To summarize, the music hasn’t stopped quite yet, but when it does, this will end very, very badly. I’m pretty sure we’re on the last song, but I don’t know how long it has left to play.

Further Reading

Erik Townsend is a hedge fund manager based in Hong Kong.


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[Feb 15, 2019] Consumption of liquid fuels grows over the next decade, before broadly plateauing in the 2030s

Highly recommended!
How they can claim that US tight oil will be produced in larger quantities if they predict stagnant oil prices and at those price the US production is unprofitable.
So from now on it's all condensate, and very little heavy and medium oil.
I like BP propaganda: "The abundance of oil resources, and risk that large quantities of recoverable oil will never be extracted, may prompt low-cost producers to use their comparative advantage to expand their market share in order to help ensure their resources are produced." That's not only stupid but also gives up the intent...
Notable quotes:
"... In the ET scenario, global demand for liquid fuels – crude and condensates, natural gas liquids (NGLs), and other liquids – increases by 10 Mb/d, plateauing around 108 Mb/d in the 2030s. ..."
"... All of the demand growth comes from developing economies, driven by the burgeoning middle class in developing Asian economies. Consumption of liquid fuels within the OECD resumes its declining trend. ..."
"... The increase in liquid fuels supplies is set to be dominated by increases in NGLs and biofuels, with only limited growth in crude ..."
www.bp.com

In the ET scenario, global demand for liquid fuels – crude and condensates, natural gas liquids (NGLs), and other liquids – increases by 10 Mb/d, plateauing around 108 Mb/d in the 2030s.

All of the demand growth comes from developing economies, driven by the burgeoning middle class in developing Asian economies. Consumption of liquid fuels within the OECD resumes its declining trend. The growth in demand is initially met from non-OPEC producers, led by US tight oil. But as US tight oil production declines in the final decade of the Outlook, OPEC becomes the main source of incremental supply. OPEC output increases by 4 Mb/d over the Outlook, with all of this growth concentrated in the 2030s. Non-OPEC supply grows by 6 Mb/d, led by the US (5 Mb/d), Brazil (2 Mb/d) and Russia (1 Mb/d) offset by declines in higher-cost, mature basins.

Consumption of liquid fuels grows over the next decade, before broadly plateauing in the 2030s

Demand for liquid fuels looks set to expand for a period before gradually plateauing as efficiency improvements in the transport sector accelerate. In the ET scenario, consumption of liquid fuels increases by 10 Mb/d (from 98 Mb/d to 108 Mb/d), with the majority of that growth happening over the next 10 years or so. The demand for liquid fuels continues to be dominated by the transport sector, with its share of liquids consumption remaining around 55%. Transport demand for liquid fuels increases from 56 Mb/d to 61 Mb/d by 2040, with this expansion split between road (2 Mb/d) (divided broadly equally between cars, trucks, and 2/3 wheelers) and aviation/marine (3 Mb/d). But the impetus from transport demand fades over the Outlook as the pace of vehicle efficiency improvements quicken and alternative sources of energy penetrate the transport system . In contrast, efficiency gains when using oil for non-combusted uses, especially as a feedstock in petrochemicals, are more limited. As a result, the non-combusted use of oil takes over as the largest source of demand growth over the Outlook, increasing by 7 Mb/d to 22 Mb/d by 2040.

The outlook for oil demand is uncertain but looks set to play a major role in global energy out to 2040

Although the precise outlook is uncertain, the world looks set to consume significant amounts of oil (crude plus NGLs) for several decades, requiring substantial investment. This year's Energy Outlook considers a range of scenarios for oil demand, with the timing of the peak in demand varying from the next few years to beyond 2040. Despite these differences, the scenarios share two common features. First, all the scenarios suggest that oil will continue to play a significant role in the global energy system in 2040, with the level of oil demand in 2040 ranging from around 80 Mb/d to 130 Mb/d. In all scenarios, trillions of dollars of investment in oil is needed Second, significant levels of investment are required for there to be sufficient supplies of oil to meet demand in 2040. If future investment was limited to developing existing fields and there was no investment in new production areas, global production would decline at an average rate of around 4.5% p.a. (based on IEA's estimates), implying global oil supply would be only around 35 Mb/d in 2040. Closing the gap between this supply profile and any of the demand scenarios in the Outlook would require many trillions of dollars of investment over the next 20 years.

Growth in liquids supply is initially dominated by US tight oil, with OPEC production increasing only as US tight oil declines

Growth in global liquids production is dominated in the first part of the Outlook by US tight oil, with OPEC production gaining in importance further out. In the ET scenario, total US liquids production accounts for the vast majority of the increase in global supplies out to 2030, driven by US tight oil and NGLs. US tight oil increases by almost 6 Mb/d in the next 10 years, peaking at close to 10.5 Mb/d in the late 2020s, before falling back to around 8.5 Mb/d by 2040. The strong growth in US tight oil reinforces the US's position as the world's largest producer of liquid fuels. As US tight oil declines, this space is filled by OPEC production, which more than accounts for the increase in liquid supplies in the final decade of the Outlook.

The increase in OPEC production is aided by OPEC members responding to the increasing abundance of global oil resources by reforming their economies and reducing their dependency on oil, allowing them gradually to adopt a more competitive strategy of increasing their market share. The speed and extent of this reform is a key uncertainty affecting the outlook for global oil markets (see pp 88-89).

The stalling in OPEC production during the first part of the Outlook causes OPEC's share of global liquids production to fall to its lowest level since the late 1980s before recovering towards the end of the Outlook.

Low-cost producers: Saudi Arabia, UAE, Kuwait, Iraq and Russia

Oil demand
Download chart and data Download this chart pdf / 64.6 KB Download this data xlsx / 10.1 KB
Excluding GTLs and CTLs

The abundance of oil resources, and risk that large quantities of recoverable oil will never be extracted, may prompt low-cost producers to use their comparative advantage to expand their market share in order to help ensure their resources are produced.

The extent to which low-cost producers can sustainably adopt such a 'higher production, lower price' strategy depends on their progress in reforming their economies, reducing their dependence on oil revenues.

In the ET scenario, low-cost producers are assumed to make some progress in the second half of the Outlook, but the structure of their economies still acts as a material constraint on their ability to exploit fully their low-cost barrels.

The alternative 'Greater reform' scenario assumes a faster pace of economic reform, allowing low-cost producers to increase their market share. The extent to which low-cost producers can increase their market share depends on: the time needed to increase production capacity; and on the ability of higher-cost producers to compete, by either reducing production costs or varying fiscal terms.

The lower price environment associated with this more competitive market structure boosts demand, with the consumption of oil growing throughout the Outlook.

Growth in liquid fuels supplies is driven by NGLs and biofuels, with only limited growth in crude oil production

The increase in liquid fuels supplies is set to be dominated by increases in NGLs and biofuels, with only limited growth in crude.

[Feb 15, 2019] S>omething like $150B in shale companies debt comes due between now and 2023.

US reserves are estimated by some to about 50 billion barrels. Oil production, along with reserve estimates, are growing in the US for one reason and one reason only, the advent of shale oil. Reserve estimates before 2008 were based on conventional oil.
Onshore conventional oil production in the USA is in steep decline. Shale oil production is intrinsically connected with financing and it produce along with oil a stream of junk bonds. At some point investors might do not want them of the bubble start deflating. Then what.
Notable quotes:
"... Next three years for Shale Drillers may be a problem. I believe something like $150B in debt comes due between now and 2023. That's a lot of debt to roll over, as well as take on more debt to fund CapEx. ..."
Feb 15, 2019 | peakoilbarrel.com

TechGuy: 02/15/2019 at 1:23 pm

Hugo Wrote:

"Dennis, with his calculation of a peak in 2025 + or – 3 years is about right."

That really depends on how much debt the Shale Drillers can take on, and presumes there is not another global recession before 2025. Next three years for Shale Drillers may be a problem. I believe something like $150B in debt comes due between now and 2023. That's a lot of debt to roll over, as well as take on more debt to fund CapEx.

Without constant US Shale production increases, world production peaks.

[Feb 15, 2019] OPEC January Production Data " Peak Oil Barrel

US reserves are estimated by some to about 50 billion barrels. Oil production, along with reserve estimates, are growing in the US for one reason and one reason only, the advent of shale oil. Reserve estimates before 2008 were based on conventional oil.
Onshore conventional oil production in the USA is in steep decline. Shale oil production is intistically connected with financing and it produce along with oil a stream of junk bonds. At some point investors might do not want them of the bubble start deflating. Then what.
Feb 15, 2019 | peakoilbarrel.com

TechGuy x Ignored says: 02/15/2019 at 1:23 pm

Hugo Wrote:
"Dennis, with his calculation of a peak in 2025 + or – 3 years is about right."

That really depends on how much debt the Shale Drillers can take on, and presumes there is not another global recession before 2025. Next three years for Shale Drillers may be a problem. I believe something like $150B in debt comes due between now and 2023. That's a lot of debt to roll over, as well as take on more debt to fund CapEx. Without constant US Shale production increases, world production peaks.

[Feb 15, 2019] Oil Rises as Aramco Said to Cut Output at Biggest Offshore Field

KSA and Russia together can drive oil price to anywhere they wish... Wall street sharks can do nothing with those giants if they cut oil output.
Notable quotes:
"... Russia plans to accelerate the output cuts it agreed to with OPEC+. ..."
Feb 15, 2019 | finance.yahoo.com

Oil climbed as Saudi Arabia was said to curtail some output from its Safaniyah offshore oil field, the largest in the world.

Futures in New York rose as much as 2.2 percent Friday, pushing toward its biggest weekly gain in a month. Saudi Arabia was said to trim supply from Safaniyah to repair a damaged power cable, while Russia plans to accelerate the output cuts it agreed to with OPEC+.

... ... ...

Saudi Arabian Oil Co.'s Safaniyah field has the capacity to pump 1.2 million to 1.5 million barrels of crude a day, and is a major component of the Arab Heavy grade. The cable was damaged in an accident about two weeks ago and repairs are expected to be completed by early March, people with knowledge of the matter said.

[Feb 15, 2019] You can see how the definitions are going to blur and they're going to allow declaring oil production numbers to be anything that they want them to be.

Highly recommended!
Notable quotes:
"... I have been suspicious for some time that production numbers can be corrupted by fuzzy definitions. ..."
"... You can see how the definitions are going to blur and they're going to allow declaring oil production numbers to be anything that they want them to be. ..."
Feb 15, 2019 | peakoilbarrel.com

Watcher: 02/15/2019 at 4:24 am

I have been suspicious for some time that production numbers can be corrupted by fuzzy definitions. Iran is being sanctioned, but Iran shares that enormous gas field under the Persian Gulf with Qatar. Gas production yields condensate and it yields NGLs.

High vapor pressure NGLs get labeled liquefied petroleum gas, and that is used for transportation fuel in India. Pentane Plus is used or called something akin to natural gasoline.

You can see how the definitions are going to blur and they're going to allow declaring oil production numbers to be anything that they want them to be. Iran is using this to dodge sanctions, or they did use it when condensate was not restricted. Don't recall if that loophole was closed in the current sanctions. That would be a good thing to know.

The same thing can happen with shale. We hear all sorts of talk about how much gas is being flared and how much gas is being captured, and you know perfectly well there has to be condensate involved. There was an article a year or so ago about NGL capture in the Bakken, but I don't recall any follow-up. It shouldn't take too much of a stretch on the part of state regulators to find a way to count the high vapor pressure portion of NGL as oil.

likbez: 02/15/2019 at 7:27 pm

You can see how the definitions are going to blur and they're going to allow declaring oil production numbers to be anything that they want them to be.

Exactly. And this, in turn, allows Wall Street to suppress the price of "prime oil" using fake production numbers, fake storage glut (which is essentially condensate glut) and similar tricks. Please note that the US refineries consume mainly "prime oil" while the USA mainly produces (and tries to export at a discount) "subprime oil."

Pretty polished and sophisticated racket. It might well be that shale oil companies are partially financed from those Wall Street profits as nobody in serious mind expect those loans to be ever repaid.

So OPEC cuts are the only weapon that OPEC countries have against this racket.

In any case, I think all those nice charts now need to be split into "prime oil" and subprime oil parts and analyzed separately. In the current conditions, treating "heavy oil" and condensate as a single commodity looks to me like pseudoscience.

[Feb 15, 2019] Laredo Petroleum recent year-end results and operations summary contained disclosures that may affect north American shale production more broadly, or perhaps they are company specific

Feb 15, 2019 | peakoilbarrel.com

dclonghorn x Ignored says: 02/14/2019 at 3:14 pm

I do not follow Laredo Petroleum closely, however their recent year-end results and operations summary contained disclosures that may affect north American shale production more broadly, or perhaps they are company specific, I don't know.

Laredo is a nice sized E&P producing around 70,000 boepd in the permian, mostly in Glasscock and Regan counties. Much of their production is horizontal Wolfcamp.

Laredo has been disappointed with its oil production recently, as well as an increasing GOR.

"Laredo has taken action to address the reduced oil productivity experienced in 2018 that we believe was impacted by the tighter spacing of some wells drilled in 2017 and 2018. Responding to these results, the Company began widening spacing on wells spud in the first quarter of 2019. Laredo expects this shift in development strategy to drive higher returns and increased capital efficiency versus 2018 as widening spacing is anticipated to address one of the causes of higher oil decline rates."

They have changed their developmental strategy to widen spacing to improve recovery and mitigate the increasing GOR. They have also reduced their capex by around 35 % from $575 million in 2018 to a planned $365 million in 2019.

"Responding to the current commodity price environment of WTI strip pricing of approximately $54 per barrel, Laredo expects to invest approximately $365 million in 2019, excluding non-budgeted acquisitions. This budget includes approximately $300 million for drilling and completion activities and approximately $65 million for
production facilities, land and other capitalized costs. Laredo anticipates adjusting capital spending levels to match operating cash flow if operating cash flow does not meet budgeted expectations. Should operating cash flow exceed budget expectations, free cash flow could be used to complete additional wells, repurchase stock or pay
down debt.

By the third quarter of 2019, enabled by the Company's operational flexibility, Laredo anticipates reducing activity from the current three horizontal rigs and two completion crews to operating one horizontal rig and utilizing a single completion crew, as needed. The front-loaded completion schedule and disciplined reduction in activity should drive free cash flow generation in the second half of 2019 that is expected to balance capital expenditures with cash flow from operations for full-year 2019."

Of course this is just one producers take on productivity concerns. Link below.

http://www.laredopetro.com/media/223310/21319-laredo-petroleum-announces-2018-fourth-quarter-and-full-year-financial-and-operating-results.pdf

Mario C Vachon x Ignored says: 02/14/2019 at 6:17 pm
Interesting. They are more a gas company than an oil company with only 23000 of the 70000 BOEs being oil. Interestingly, they are forecasting oil production to decline 5% year over year while BOEs rises high single digits, showing how gas to oil keeps rising.

As such a tiny oil producer (23000 barrels) its pretty meaningless in the grand scheme, but very interesting nonetheless. Thanks for sharing.

[Feb 15, 2019] Saudi Aramco halted oil output this week at Safaniyah, the world's largest offshore oilfield

Notable quotes:
"... The unplanned shutdown takes out another 1 million barrels a day of heavy oil from the market, Alex Schindelar, executive editor of content & strategy at Energy Intelligence Group tweeted Thursday, adding that the heavy crude oil market was already tight because of the OPEC output cuts and U.S. sanctions on both Iran and Venezuela. ..."
Feb 15, 2019 | peakoilbarrel.com

Greenbub x Ignored says: 02/14/2019 at 6:06 pm

Saudi Aramco halts oil output at the world's largest offshore oilfield: report

Saudi Aramco halted oil output this week at Safaniyah, the world's largest offshore oilfield, Energy Intelligence reported Thursday, citing sources familiar with the matter, according to a tweet from Amena Bakr, senior correspondent at the news and research service provider. Further information was only available through subscription-based Energy Intelligence.

The potential impact on oil prices depends on how long output at the oilfield is down, said Phil Flynn, senior market analyst at Price Futures Group.

"The thinking is that the field produces heavy crude, and the world is short of that [type of] oil."

The unplanned shutdown takes out another 1 million barrels a day of heavy oil from the market, Alex Schindelar, executive editor of content & strategy at Energy Intelligence Group tweeted Thursday, adding that the heavy crude oil market was already tight because of the OPEC output cuts and U.S. sanctions on both Iran and Venezuela.

In electronic trading, March WTI oil CLH9, +1.06% was at $54.51 a barrel, after settling at $54.41 on the New York mercantile Exchange.

~Marketwatch

[Feb 15, 2019] True KSA reserves are very likely somewhere in the neighborhood of 70 billion barrels.

Feb 15, 2019 | peakoilbarrel.com

Ron Patterson x Ignored says: 02/14/2019 at 4:37 pm

I had to google the link, but it was not hard to find.

How Much Oil Does Saudi Arabia Really Have?

Okay, you will have to read the article to see how Robert arrived at his conclusion. But his conclusion is:

So, I have no good reason to doubt Saudi Arabia's official numbers. They probably do have 270 billion barrels of proved oil reserves.

I find his logic horribly flawed. Robert compares Saudi's growing reserve estimates with those of the USA.

First, the US Securities and Exchange Commission have the strictest oil reporting laws in the world, or did have in 1982. Also, better technology has greatly improved reserve estimates. And third, the advent of shale oil has dramatically added to US reserve estimates.

Saudi has no laws that govern their reserve reporting estimates.

From Wikipedia, US Oil Reserves: Proven oil reserves in the United States were 36.4 billion barrels (5.79×109 m3) of crude oil as of the end of 2014, excluding the Strategic Petroleum Reserve. The 2014 reserves represent the largest US proven reserves since 1972, and a 90% increase in proved reserves since 2008.

Robert says US reserves are 50 billion barrels. I don't know where he gets that number but it really doesn't matter. Oil production, along with reserve estimates, are growing in the US for one reason and one reason only, the advent of shale oil. Reserve estimates before 2008 were based on conventional oil. Onshore conventional oil production in the USA is in steep decline.

Robert Rapier is brillant oil man, but a brilliant downstream oil man. Refineries are his forte. He should know better than the shit he produced in that article.

100 percent of Saudi Arabia's reserves are based on conventional oil. Their true reserves are very likely somewhere in the neighborhood of 70 billion barrels.

[Feb 15, 2019] Opec spare capacity and the difference between "prime oil" and "subprime oil."

Notable quotes:
"... If you take a look at PXD announcements, I reach the conclusion that Permian is slowing ..."
Feb 15, 2019 | peakoilbarrel.com

Hugo

x Ignored says: 02/14/2019 at 2:35 am
OPEC spare capacity is now around 2 million barrels per day.

OPEC has cut production by 1.5 million barrels per day in the last 2 months.

Besides that Saudi Arabia and Kuwait have ended their dispute over the neutral zone, which will add another 500,000 of spare capacity.

https://oilprice.com/Energy/Crude-Oil/Saudi-Arabia-Kuwait-Discuss-New-Oil-Production-In-Neutral-Zone.html

IN the longer term Saudi Arabia will add another 1mmbd to it's capacity over the next few years.

https://www.reuters.com/article/us-oil-opec-falih-investment/saudi-arabia-to-invest-20-billion-in-spare-oil-production-capacity-idUSKCN1ME111

likbez says: 02/14/2019 at 4:51 pm
As Ron Patterson explained several times here, OPEC members cheat. They cut from the elevated, unsustainable level, achieved specifically to accommodate cuts.

So "after cut" level is often not that different from a reasonable "normal," sustainable production level in their current production conditions, plus some, related to previously delayed maintenance, shutdowns.

Four years of capital underinvestment bite production both in OPEC and non-OPEC. So talking about excess capacity is somewhat problematic and we now need to distinguish between "prime oil" and "subprime oil."

Most people who talk about "excess capacity" are interested in lower oil price (the list includes US and EU governments ) That's why condensate and other "subprime oil" is counted in total oil output. Supply of "prime oil" now is stressed.

In other words, everything connected with oil is now politically charged. That means that it is not wise to take IEA data and their forecasts at face value. It should be viewed as an opinion of the agencies deeply (institutionally) interested in the low oil price.

You need the ability to read between the lines, much like readers of the press in the USSR. And as several experts here do. You need the acute ability to cut through "official bullsh*t".

And neutral expert opinion is very difficult to come by. That's why this blog has so much value.

Watcher x Ignored says: 02/14/2019 at 3:44 am
Heads up. Some scroll upwards there is a quoted article from oilprice.com.

The writer is Nawar Alsaadi. I suspect we fell victim of presumption. He has an Arabic sounding name, and that leads us to suspect he knows something about oil.

Look into this guy. There's nothing ugly or horrible about his background, but there is nothing in it that shouts out expert. He is a writer. Including publishing fiction.

He's also "with" some investment firm. Turns out he's president and CEO of the firm and conveniently an employee count is not easily found.

Ned x Ignored says: 02/14/2019 at 3:58 am
I'm curious – does anybody know, by the data trends, which OPEC country is likely to run so low on oil that they become a net importer, next? I do understand this event may take some time to occur.
Krishnan Viswnathan x Ignored says: 02/14/2019 at 11:17 am
If you take a look at PXD announcements, I reach the conclusion that Permian is slowing. Like Dennis Coyne, I look at growth after fourth quarter 2018. Oil production in fourth quarter is 199.2 Kilo barrels/day. The guidance for 2019 is between 203 to 213 Kilo barrels/day. PXD is spending 300 MM dollars for gas processing and water treatment infrastructure.

[Feb 15, 2019] Mankind probably has another trillion barrels at best to consume in the future in addition to the 1.3 trillion already consumed.

Which means around 30 years at the current consumption rate
Feb 15, 2019 | peakoilbarrel.com

Ron Patterson x Ignored says: 02/14/2019 at 5 :39 pm

Food for thought

I just did a little math using OPEC's estimate of OPEC and Non-OPEC World proven oil Reserves.

OPEC says they have 1214.21 billion barrels of proven reserves. And they say non-OPEC has 268.56 billion barrels of proven reserves. Average OPEC C+C production, over the last four years, has been 12.78 billion barrels per year according to the EIA. The EIA says the average non-OPEC C+C production over the last four years has been 16.8 billion barrels per year.

Okay, here is the killer. If those numbers are correct then the average non-OPEC nation has an R/P ratio of 16 while the average OPEC nation has an R/P ratio of 95. If you think those R/P ratio numbers are even remotely correct then I have a bridge I would like to sell you.

Ravi x Ignored says: 02/14/2019 at 11:05 pm
Ron,

I agree that the R/P numbers seem very suspicious. But if this is true then OPEC reserves are closer to 400-500 billion barrels not 1.2 trillion barrels. That would give us another trillion barrels at best to consume in the future in addition to the 1.3 trillion already consumed. This brings the URR to 2.2-2.5 trillion barrels at best including extra heavy. What do you think of the URR of 3.1 trillion barrels that is commonly assumed? Also canadian tar sands and venezuelan heavy oil have very low EROI which brings down the extractable oil reserves further. Do you think that is taken into account?

[Feb 14, 2019] Fifty Shades Of Shale Oil by Nawar Alsaadi

Feb 14, 2019 | oilprice.com

Analysis

This fallacious narrative of the U.S. tight oil industry overcoming the oil price crash of 2014 through innovation and better efficiency is the product of bundling various tight oil basins under one umbrella and the presentation of the resulting production data as a proof U.S. shale resiliency.

To properly understand the impact of the oil price crash of 2014 on U.S. tight oil production one must focus on shale basins with sufficient operating history prior to the oil price crash and examine their performance post the crash.

To that end, the Bakken and the Eagle Ford are the perfect specimen.

The Bakken and the Eagle Ford are the two oldest tight oil basins in the United States, with the former developed as early as 2007 and the latter in 2010.

Examining the production performance of these two basins in the 4 years preceding the oil crash and contrasting it to the 4 years subsequent to it, offers important insight as to the resiliency of U.S. tight oil production in a low oil price environment.

... ... ...

Both the Bakken and the Eagle Ford grew at a phenomenal rate between 2010 and 2014. The Eagle Ford grew from practically nothing in 2010 to 1.3M barrels by 2014, while the Bakken grew five fold from 190K barrels to 1.08M barrels. Following the collapse in oil prices in late 2014, the Bakken and Eagle Ford growth continued for another year, albeit at a slower pace, as the pre-crash momentum carried production to new highs. However, by 2016, both the Bakken and the Eagle Ford went into a decline and have hardly recovered since. It took the Bakken three years to match its 2015 production level, meanwhile the Eagle Ford production remains 22% below its 2015 peak. During the pre-crash years these two fields grew by a combined yearly average of 600K to 700K barrels from 2012 to 2014. Post the oil price collapse, this torrid growth turned into a sizable decline by 2016 before stabilizing in 2017.

Growth in both fields only resumed in 2018 at a combined yearly rate of 210K barrels, a 70% reduction from the combined fields pre-crash growth rate.

The dismal performance of these two fields over the last few years paints a different picture as to U.S. tight oil resiliency in a low oil price environment. The sizable declines, and muted production growth in both the Bakken and the Eagle Ford since 2014 discredit the leap in technology and the efficiency gains narrative that has been espoused as the underlying reason beyond the strong growth in U.S. oil production. As we expand our look into other tight oil basins, it becomes apparent that it was neither technology or efficiency that saved the U.S. tight oil industry, although these factors may have played a supporting role. In simple terms, the key reason as to the strength of U.S. production since the 2014 oil crash is better rock, or rather, the commercial exploitation of a higher quality shale resource, namely the Permian oil field.

... ... ...

The Permian oil field, unlike the Bakken and the Eagle Ford, was a relative latecomer to the U.S. tight oil story. It was only in 2013, only a year before the oil crash, that the industry commenced full scale development of that giant field's shale resources. Prior to 2013, the Permian lagged both the Bakken and the Eagle Ford in total tight oil production and growth. As can be seen from the preceding graph, the oil crash had only a minor dampening effect on the Permian oil production growth. By 2017, Permian tight oil growth resumed at a healthy clip, and by 2018, Permian tight oil production growth shattered a new record with production skyrocketing by 860K barrels in a single year to 2.76M barrels. This timely unlocking and exploitation of the Permian oil basin masked to a large degree the devastation endured by the Bakken and the Eagle Ford post 2014. In essence, the U.S. tight oil story has two phases masquerading as one: the pre-2014 period marked by the birth and rise of the Bakken and Eagle Ford, and the post-2014 period, marked by the rise of the Permian.

To speak of the U.S. tight oil industry as one is to mistake a long-distance relay race for the accomplishment of a single runner.

The performance divergence between the Bakken, Eagle Ford, and the Permian has major implications as to the likelihood of U.S. tight oil production suppressing oil price over the medium and long term. A close examination of U.S. tight oil production data leads to a single indisputable conclusion: without the advent of the Permian, the U.S. tight oil industry would have lost the OPEC lead price war. Hence, it's a misnomer to treat the U.S. tight oil industry as a monolith, in many ways, the Bakken and the Eagle Ford tight oil fields are as much a victim of the Permian success as the OPEC nations themselves.

... ... ...

Considering that the majority of U.S. tight oil production growth is generated by a single field, the Permian, changes in the growth outlook of this basin have major implications as to the evolution of global oil prices over the short, medium and long term. Its important to keep in mind that the Permian oil field, despite its large scope, is bound to flatten, peak and decline at some point. While forecasters differ as to the exact year when the Permian oil production will flatten, the majority agree that a slowdown in Permian oil production growth will take place in the early 2020s.

According to OPEC (2018 World Oil Outlook), the Permian basin oil production curve is likely to flatten by 2020, with growth slowing down from 860K barrels in 2018 to a mere 230K barrels by 2020:

[Feb 13, 2019] Oil gains 2 percent as Saudi Arabia readies more supply cuts

Feb 13, 2019 | finance.yahoo.com

Saudi Arabia planning to drop March crude output by more than a half a million barrels per day below its initial pledge.

... ... ...

OPEC said on Tuesday it had reduced oil production almost 800,000 bpd in January to 30.81 million bpd under its voluntary global supply pact.

Saudi Arabia Energy Minister Khalid al-Falih told the Financial Times that the kingdom would reduce cut production to about 9.8 million bpd in March to bolster oil prices.

[Feb 13, 2019] Declining GOM output in 2019 is a more likely scenario then IEA prediction of increase of production

Notable quotes:
"... they expect maybe 200 kb/d higher output in the GOM and my interpretation of George Kaplan's and SouthLaGeo's recent comments is that flat or possibly declining GOM output is a more likely scenario. ..."
Feb 13, 2019 | peakoilbarrel.com

Energy News, 02/12/2019 at 2:29 pm

The EIA's STEO released today.
https://www.eia.gov/outlooks/steo/
They forecast US C+C production to increase +0.79 million barrels per day during 2019
From Dec 2018 11.93 million barrels per day
To Dec 2019 12.72 million barrels per day
Dennis Coyne, 02/12/2019 at 4:12 pm
The EIA's forecast might not be too far off, but I think they expect maybe 200 kb/d higher output in the GOM and my interpretation of George Kaplan's and SouthLaGeo's recent comments is that flat or possibly declining GOM output is a more likely scenario.

[Feb 12, 2019] Venezuela production should take a larger drop in February.

Feb 12, 2019 | peakoilbarrel.com

Fernando L x Ignored says: 02/12/2019 at 5:36 pm

Venezuela production should take a larger drop in February. Today Interim President Guaidó announced Feb 23 would be the day a big push would be made to push humanitarian aid columns into Venezuela. Collection points for food and medicine are now available in Colombia and Brazil, and others are being prepared.

Maduro moved 700 special forces (FAES) which are usually kept serving as death squads in large cities, to cover the bridges between Ureña in Venezuela and Cucuta in Colombia, with orders to fire on the humanitarian relief trucks. Guaidó responded the border was plenty long and Maduro lacked enough FAES and Cubans to stop the relief from crossing the border. He also pointed out that if Maduro had to use death squads to patrol the border it meant he didn't trust the Army, the National Guard or the National Police, so he asked for volunteers inside Venezuela to help overcome Maduro's thugs with sheer numbers.

Today it became very common to see an individual scream "Maduro!" and the crowd respond "f k you!". It's the way people pass the time at metro stations and while waiting in line. And the police seem to have abandoned the usurper, because they seldom do anything about it.

[Feb 12, 2019] Oil gains 2 percent

Feb 12, 2019 | finance.yahoo.com

Rising oil prices help Venezuela more than it helps the rest of OPEC because Venezuela needs the money more.

[Feb 12, 2019] OPEC January Production Data " Peak Oil Barrel

Feb 12, 2019 | peakoilbarrel.com

OPEC + Russia, down 1,590,000 barrels per day since October, should be enough to move the market. And it does seem to be up about 1.5% this morning.

[Feb 12, 2019] Sanctions, OPEC cuts push Asia's heavy crude oil prices above Brent

Feb 12, 2019 | finance.yahoo.com

Middle East oil benchmarks Dubai and DME Oman have nudged above prices for Brent crude, an unusual move as U.S. sanctions on Venezuela and Iran along with output cuts by OPEC tighten supply of medium to heavy oil, traders and analysts said.

Heavier grades, mainly produced in the Middle East, Canada and Latin America, typically have a high sulphur content and are usually cheaper than Brent, the benchmark for lighter oil in the Atlantic Basin.

[Feb 11, 2019] Are Investors Finally Waking up to North America's Fracked Gas Crisis naked capitalism

Notable quotes:
"... By Justin Mikulka, a freelance writer, audio and video producer living in Trumansburg, NY. Originally published at DeSmog Blog ..."
"... Hints that gas investors are no longer happy with growth-at-any-cost abound. For starters, several major natural gas producers have announced spending cuts for 2019. After announcing layoffs this January, EQT, the largest natural gas producer in the U.S., also promised to decrease spending by 20 percent in 2019. ..."
"... As DeSmog has reported, the historically low interest rates following the 2008 housing crisis were a major enabler of the free-spending and money-losing attitudes in the shale industry. Wall Street has funded a decade of oil and gas production via fracking and incentivized production over profits. Those incentives have worked, with record production and large losses. ..."
"... However, much like giving mortgages to people without jobs wasn't a sustainable business model, loaning money to shale companies that spend it all without making a profit is not sustainable. Wall Street investors are now worried about getting paid back, and interest rates are rising for shale companies to the point that borrowing more money is too financially risky for them. And because they aren't earning more money than they spend, these companies need to cut spending. ..."
"... The days of unlimited low-interest loans for an industry on a decade-long losing streak might be coming to an end. As Bloomberg credit analyst Spencer Cutter explained to CNN : "Investors woke up and realized this was built on debt." ..."
"... One reason natural gas is so cheap right now is that fracking for oil in the U.S. ends up producing huge amounts of gas at the same time. This gas that comes out of the wells with the oil is known as "associated gas." And it is so plentiful that in places like the Permian Basin in Texas, the price of natural gas has actually gone negative . Paying someone to take the product that a company spent money to produce is not a sustainable business model. ..."
"... While U.S. politicians from both parties have given standing ovations for the U.S. oil and gas industry , investors appear to be losing their enthusiasm. The so-called shale revolution, the fracking miracle, may have resulted in record oil and gas production in North America, but the real miracle -- in which shale companies make money fracking that oil and gas -- has yet to occur. ..."
"... This has long been one of my concerns in the field. I've long held that the federal government should simply outlaw the practice, forcing drillers to find something to do with the gas (bury it, ship it or use it to create electricity). At the very least, it should be prohibited on federal lands as part of the contracts that are signed. ..."
Feb 11, 2019 | www.nakedcapitalism.com

Are Investors Finally Waking up to North America's Fracked Gas Crisis? Posted on February 11, 2019 by Jerri-Lynn Scofield Jerri-Lynn here. I try not to miss a post in Justin Mikulka's excellent series covering the fracking beat for DeSmog Blog. Here's his latest.

By Justin Mikulka, a freelance writer, audio and video producer living in Trumansburg, NY. Originally published at DeSmog Blog

The fracked gas industry's long borrowing binge may finally be hitting a hard reality: paying back investors.

Enabled by rising debt , shale companies have been achieving record fracked oil and gas production, while promising investors a big future payoff. But over a decade into the " fracking miracle ," investors are showing signs they're worried that payoff will never come -- and as a result, loans are drying up.

Growth is apparently no longer the answer for the U.S. natural gas industry, as Matthew Portillo, director of exploration and production research at the investment bank Tudor, Pickering, Holt & Co., recently told The Wall Street Journal .

"Growth is a disease that has plagued the space," Portillo said. "And it needs to be cured before the [natural gas] sector can garner long-term investor interest."

Hints that gas investors are no longer happy with growth-at-any-cost abound. For starters, several major natural gas producers have announced spending cuts for 2019. After announcing layoffs this January, EQT, the largest natural gas producer in the U.S., also promised to decrease spending by 20 percent in 2019.

Such pledges of newfound fiscal restraint are most likely the result of natural gas producers' inability to borrow more money at low rates.

As DeSmog has reported, the historically low interest rates following the 2008 housing crisis were a major enabler of the free-spending and money-losing attitudes in the shale industry. Wall Street has funded a decade of oil and gas production via fracking and incentivized production over profits. Those incentives have worked, with record production and large losses.

However, much like giving mortgages to people without jobs wasn't a sustainable business model, loaning money to shale companies that spend it all without making a profit is not sustainable. Wall Street investors are now worried about getting paid back, and interest rates are rising for shale companies to the point that borrowing more money is too financially risky for them. And because they aren't earning more money than they spend, these companies need to cut spending.

CNN Business recently reported that oil and gas companies stopped borrowing money in October 2018, but not out of restraint. Instead, CNN wrote, "investors, fearful of defaults, demanded a hefty premium to lend to energy companies."

With many fracking companies failing to meet their production forecasts , as The Wall Street Journal has reported , investors may have good reason to be fearful.

The days of unlimited low-interest loans for an industry on a decade-long losing streak might be coming to an end. As Bloomberg credit analyst Spencer Cutter explained to CNN : "Investors woke up and realized this was built on debt."

Canada's Natural Gas Market Facing 'A Daunting Crisis'

Prospects for natural gas don't look much better north of the U.S. border. Like the Canadian tar sands oil market , the Canadian natural gas market is also in the midst of a long losing streak. The problems facing the natural gas market in Alberta, Canada, is "far worse than it is for oil," said Samir Kayande, director at RS Energy, according to Oilprice.com .

Canadian natural gas producers are being crushed by the free-spending American companies that could produce records amounts of gas at a loss while using borrowed money.

One reason natural gas is so cheap right now is that fracking for oil in the U.S. ends up producing huge amounts of gas at the same time. This gas that comes out of the wells with the oil is known as "associated gas." And it is so plentiful that in places like the Permian Basin in Texas, the price of natural gas has actually gone negative . Paying someone to take the product that a company spent money to produce is not a sustainable business model.

https://www.youtube.com/embed/T7NBs9ixJck

Additionally, the U.S. oil and gas industry chooses to flare large amounts of natural gas in oil fields because it's cheaper than building the necessary infrastructure to capture it -- literally burning its own product instead of selling it. And the Canadian producers, who used to sell gas to the U.S. market, simply can't compete.

A natural gas advisory panel to Alberta's energy minister addressed the crisis for Canadian natural gas producers in the December 2018 report " Roadmap to Recovery: Reviving Alberta's Natural Gas Industry ." The report's opening line summarizes the problem:

" Traditional markets for Alberta natural gas are oversupplied. Prices, and therefore industry and government revenues, are crushingly low and have been increasingly volatile locally since the summer of 2017."

Noting the dire situation, one natural gas executive predicted that "this will only get worse in 2019." Too much supply, not enough demand. To remedy this problem, the report recommended expanding supply, decreasing regulation, and bailing out companies with financial backing from the government, with the ultimate goal of producing more gas and exporting it to Asia.

With Alberta's reliance on oil and gas to support its economy, it is easy to see why its politicians are loathe to recognize the economic realities of the natural gas (and tar sands oil) industries. However, some politicians feel the same way about the American coal industry, and that is dying primarily because renewables and natural gas are cheaper ways to produce electricity.

Desperate Times for Leading Gas Producer

Chesapeake Energy is often held up as a case study for the fracking boom. It was a huge early financial success story (based on its stock price, not actual profits), and in 2008, its then- CEO Aubrey McClendon, known as the "Shale King," was the highest paid Fortune 500 CEO in America. Since those high times, it has been a rough decade for Chesapeake. The stock price is near all-time lows -- where it has remained for years.

Chesapeake has stayed afloat by borrowing cash and currently owes around $10 billion in debt. Unable to make money fracking gas in America since the days of the Shale King, Chesapeake has a new strategy -- fracking for oil.

The Wall Street Journal recently reported this shift in Chesapeake's strategy, referring to it as "ill-timed" and "straining already frayed finances."

But Chesapeake is all-in on this new strategy. According to The Wall Street Journal, Chesapeake CEO Doug Lawler said the company "plans to dedicate at least 80 percent of 2019 capital expenditures to oil production because it sees crude as the key to a more profitable future."

One of the top gas producers in America and a "fracking pioneer" is abandoning fracked gas as a path to a profitable future. The fact that Chesapeake now believes fracking for oil is a path to a profitable future -- despite all the evidence to the contrary -- gives this move an air of desperation.

While U.S. politicians from both parties have given standing ovations for the U.S. oil and gas industry , investors appear to be losing their enthusiasm. The so-called shale revolution, the fracking miracle, may have resulted in record oil and gas production in North America, but the real miracle -- in which shale companies make money fracking that oil and gas -- has yet to occur.

The North American natural gas industry is facing a crisis with an oversupplied market and producers that are losing money. Those producers desperately need higher natural gas prices. However, higher gas prices mean renewables become even more attractive to investors, which may lead to gas following in the footsteps of coal -- dying at the hands of the free market. It may take some time, but eventually investors wake up -- or run out of money.

Follow the DeSmog investigative series: Finances of Fracking: Shale Industry Drills More Debt Than Profit

Ignacio , February 11, 2019 at 4:14 am

I no longer wonder why US press treats the Nord Stream 2 as "controversial" with this glut of debt fuelled natl. gas. Instead, the media should be clamoring against gas flaring, a practice that should be banned. ClimateChange101 regulation.

Carolinian , February 11, 2019 at 9:31 am

It does illustrate what any Green New Deal would be up against. Not only are simple environmental steps like no flaring opposed, but investors and drillers cling to an extraction process that doesn't even make money rather than give in to a more rational, government planned energy system. You begin to think it's not even about the money but more about who's in charge. Before we conquer AGW we may have to conquer human nature. The assumption behind the GND and indeed all AGW activism seems to be that if the world is just shown the rational path then the world will take it. The above illustrates how very irrational the world really is.

Peter , February 11, 2019 at 8:13 am

But the real miracle -- in which shale companies make money fracking that oil and gas -- has yet to occur. Which will be a miracle.
I was involved in the service part of the Peace River area gas extraction (and some oil) since the early 1980, and also when the shale gas extraction started in the early 2000's with horizontal drilling changing the face of gas production.

By 2006/8 there was talk after heavy investment by Petronas of up to TEN LNG plants at the west coats in the Kitimat area not one has been build to date, no pipeline exists and no means to get any gas to market other than to the internal Canadian and the now oversupplied US market. It was a failure of politicians and regulatory agencies to speed up the permissions and likely as well the dithering by investors, that now Australia has taken on the supply of the Asian market.

tegnost , February 11, 2019 at 8:41 am

Granted they are speaking of Canada as the source of bailout, but the country will be bailing globalist investors which maybe has gone on long enough? Anyway, the same neoliberal playbook "I got your free market right here shame if somethin' was to happen to it "

To remedy this problem, the report recommended expanding supply, decreasing regulation, and bailing out companies with financial backing from the government, with the ultimate goal of producing more gas and exporting it to Asia.

Olivier , February 11, 2019 at 9:36 am

Of all the questionable practices of oil and mining companies flaring is probably the most abhorrent.

Another Scott , February 11, 2019 at 11:00 am

This has long been one of my concerns in the field. I've long held that the federal government should simply outlaw the practice, forcing drillers to find something to do with the gas (bury it, ship it or use it to create electricity). At the very least, it should be prohibited on federal lands as part of the contracts that are signed.

a different chris , February 11, 2019 at 9:39 am

>in the U.S. ends up producing huge amounts of gas at the same time.

And thus they were family-blogged. For the simple reason that this wasn't your, let alone your father's "oil bidness" anymore. Once upon a time wells were dug for water. You pumped water out, more seeped in. Should have been forever but well that's another discussion. Then you dug wells for oil. They were finite, but they lasted decades. Now you think you are "digging wells", but what you really are doing is building an underground factory. In a factory, you seed the inventory and say "go" and stuff comes out the other end. To make another batch the crank needs to be turned again.

They don't have any model in their heads that matches this. Thus they wind up with what to a manufacturer is obviously "scrap" production, aka stuff that they don't have a market for. Why it took Wall Street so long to understand this is a mystery, except I do wonder if many of them knew it but just wanted to "screw the greenies". They aren't going to miss any meals, so why not I guess.

Alex V , February 11, 2019 at 9:41 am

This is just f*&%"#g depressing. A decade of using debt that will be never be paid back to put carbon into the atmosphere that will never go back in the ground, sometimes not even extracting the energy from it first. We deserve what is coming.

Rajesh K , February 11, 2019 at 9:59 am

I read "investors are showing signs they're worried that payoff will never come" as "investors can't borrow money for cheap anymore now that the Fed has raised rates". If the Fed were to reverse course and CUT interest rates, the party will continue. Wanna bet? In another topic, how would MMT prevent people from investing in fracking?

Angie Neer , February 11, 2019 at 12:02 pm

MMT is not a policy, it is an explanatory framework. And it certainly doesn't explain human behavior.

notabanker , February 11, 2019 at 10:27 am

#Fieldwork

Talking to a 2nd or 3rd generation owner of a small family run oil and gas company that maintains local wells about 8 months ago. I expressed my concern about fracking locally. He laughed. Then said in a serious and not at all condescending tone that there is no money going into fracking at these NG prices and it's unlikely to change in the future. He went on to explain where the deposits were, the expense and environmental issues the large frackers are up against and basically said he doesn't see a scenario where it's ever expanded close to populated areas, if it recovers at all. He genuinely didn't see much future in it.

a different chris , February 11, 2019 at 1:19 pm

That would be reassuring but he was using, you know, "logic". That doesn't really match the fracker's MO, does it?

Peter , February 11, 2019 at 1:29 pm

Of course there is no future in it. Shale deposits are vertically small that horizontally extend large distances, which means horizontal drilling. Not only that, usually you need parallel wells for water injection to force the oil or gas out. The cost are much greater compared to conventional vertical drilling with the technical solutions necessarily involved. The wells deplete rapidly within a few years, requiring new wells. I have been on sites in the Peace where wells were producing mainly water after three years.

Michael Fiorillo , February 11, 2019 at 10:49 am

Those opposed to fracking for environmental reasons should perhaps also consider opposing it on national security grounds, since, given the limitations/costs of fracking, those resources should be seen as emergency rations, to be tapped only when absolutely necessary.

That fracked oil and gas is being spewed into the atmosphere when prices are low and falling, and more easily-obtained stocks are plentiful elsewhere, is just compounding the mania with insanity.

It also suggests to me that, since there isn't real money being made, there are geo-strategic, National Security State-related reasons for the US' sudden impulse to jack up oil production.

Steven , February 11, 2019 at 11:13 am

These Wall Street fracking and shale subsidies percolate through the entire economy. In addition to obvious hangers-on like the automobile industry, you have privately owned electrical utilities rushing to load up on as much stranded asset, centralized fossil fuels generation and distribution infrastructure as they can jam through their respective state public utilities commission before the gas bubble bursts.

What is important here is extending and preserving stock price rallies, elevated CEO salaries and coupon-clipping opportunities for rentiers as possible, not economic efficiency in any form that could be understood by anyone but bankers and financiers.

cnchal , February 11, 2019 at 11:24 am

> Are Investors Finally Waking up to North America's Fracked Gas Crisis?

No, because they are not investors but gamblers.

Wall Street has funded a decade of oil and gas production via fracking and incentivized production over profits.

More to the point, no Wall Street criminal was harmed because not one was stupid enough to throw his or her own money on the roll of the dice, but they certainly took the gamblers money and for a fat fee, throw the dice for them.

Susan the Other , February 11, 2019 at 11:41 am

This is getting old. Why does anyone believe in free-market economics in an emergency? It's puzzling that just when oil went into a huge glut and the heavy, full-to-the-brim tankers lined up in all the deep ports, like treasure chests, and the price of oil dropped because the global economy had been slashed by a third it was just at this time that Obama made his panicked decision to frack, to deregulate, and to subsidize it. So these so-called "investors" who are raising their prices for loans, have either seen demand come back and want their fair share of the whole ponzi operation, or the QE that facilitated it all has been tapped out politically, regardless of the economics. No one seemed to care that all the natgas blown off each well was accelerating the CO2 effect, measurably. No one cared about the polluted ground water. Nobody acknowledged that Germany didn't want our LNG. Only free money could have caused this perversion of productivity, all this destruction, this gold rush to nowhere. Our sovereign money should be distributed wisely. Never like this. And never into a deregulated market.

kernel , February 11, 2019 at 12:00 pm

Yikes, ugh, and AAARRRRRGH! Not the 1st I've heard of this (Gas Bubble), but this nails it all down.

Was this (partly/directly) caused by QE? My impression is that QE pumped a bunch of "money" into the top end of the economy (Assets/Wall Street), propping up the Stock Market, but I've never gotten exactly HOW they did it.

Did the Fed just buy lotsa Stock (or Corp Bonds)? If so, did they (partly) create the Gas Bubble by (over-) investing in Fracking companies? If so, they are now stuck bursting that bubble as they "De-QE"; either they (We!) get out of that market early – blowing it up sooner – or wait until it deflates "normally" and lose a bunch of (Our?) money.

Are the details of QE (how much of which assets the Fed bought) public?

[Feb 09, 2019] As of 2017, Rosneft controlled 13% of Venezuela's crude exports

Notable quotes:
"... Last year, oil production dropped by 37% compared with 2017. So, Maduro has been struggling to pay back the loans and last year, Sechin had to fly to Caracas to negotiate with the Venezuelan leader over delayed oil supplies. ..."
Feb 09, 2019 | www.asiatimes.com

As of 2017, Russia controlled 13% of Venezuela's crude exports, Reuters reported . According to some experts, Rosneft has been taking advantage of Venezuela's difficulties to secure deals which will be profitable in the long term.

... ... ...

The beleaguered country's economy is on the verge of collapse and the oil sector, which accounts for over 90% of national export revenues, has not been spared. Last year, oil production dropped by 37% compared with 2017. So, Maduro has been struggling to pay back the loans and last year, Sechin had to fly to Caracas to negotiate with the Venezuelan leader over delayed oil supplies.

Russia's concern about a collapse in Venezuela's economy is tangible. A delegation of high-ranking Russian officials flew to Caracas in October to advise the government on how to overcome the crisis. With the country in a state of turmoil, Russia's Deputy Minister of Finance Sergei Storchak said he expects Venezuela to struggle to repay its debt, and the next $100 million tranche is due next month.

[Feb 08, 2019] The US dollar is used for the international oil and gas trade and a wide part of global trade. This gives the US an exorbitant privilege to sanction countries it opposes and impose its conditions for oil trading

Feb 08, 2019 | off-guardian.org

Narrative says Feb, 1, 2019

Nations should explore better system to break US hegemony

"The US dollar is used for the international oil and gas trade and a wide part of global trade. This gives the US an exorbitant privilege to sanction countries it opposes.
..
The latest sanctions on Venezuela's state-owned oil company aim to cut off source of foreign currency of Venezuelan strongman Nicolas Maduro's government and eventually force him to step down.
..
A new mechanism should be devised to thwart such a vicious circle"

http://www.globaltimes.cn/content/1137847.shtml

crank says Feb, 1, 2019
Francis Lee; Big B,

OK I phrased that badly.

My question is really about those at the top of the power pyramid (those few hundred families who own the controling share of the wealth of the world) -- those who position idiots like Bolton to do their work, do they comprehend 'exergy' decline ?

If we can, then can they not? I agree with Parenti that they are not 'somnambulists'. They are strategists looking out for their own interests, and that means scrutinising trends in political movements, culture, technology and, well, just about everything. I find it hard, the idea that all these people -- people who have seen their businesses shaped by resource discovery, exploitation and then depletion, have no firm grasp on the realities of dwindling returns on energy.

The models were drawn up 47 years ago. I think that some of them at least, do understand that economic growth is coming to a halt, and have understood for decades. If true then they are planning that transition in their favour.

These hard to swallow facts about oil are still on the far fringes of any political conversation. The neoliberal cultists are deaf to them for obvious reasons; the socialist idealists believe that a 'New Deal' can lead us off the death train, but mostly ignore the intractable relationship between energy decline and financial problems; even the anarchists want their work free utopia run by robots and AI but stop short of asking whether solar panels and wind turbines can actually provide the power for all that tech. It's the news that nobody wants to think about, but which they will be forced to thinking about in the very near future.

The Twitter feed 'Limits to Growth' has less than 800 followers (excellent though it is).

BigB says Feb, 1, 2019
Crank

I do not want to get into the mind of the Walrus of Death Bolton! I do not want to know what he does, as he does. But at lower levels of government, and corporatism, there is an awareness of surplus energy economics. And as Nafeez has also pointed out, the military (the Pentagon) are taking an interest. And though it could rapidly change, who really appreciates the nuances of EROEI? I'm guessing at less than a single percent of all populations? And how many include its effects in a integrated political sense?

Its appreciation is sporadic: ranging from tech-utopia hopium to a defeated fatalism of the inevitability of collapse. Unless and until people want to face the harshness of the reality that capitalism has created: we are going to be involved in a marginal analysis. There are very few people who have realised that capitalism is long dead.

Dr Tim Morgan estimates that world capitalism has conservatively had $140tn in stimulus since 2008 -- without stimulating anything or reviving it at all. In fact, that amounts to the greatest robbery in history -- the theft of the future. Inasmuch as they can, those unrepayable debts -- transferred to inflate the parasitic assets of capitalists -- will be socialised. Except they cannot be. Not without surplus energy.

https://surplusenergyeconomics.wordpress.com/2019/01/20/145-fire-and-ice-part-two/

Brexit, gilets jaunes, Venezuela, unending crises in MENA, China's economic slowdown, etc -- all linked by EROEI.

It is a common socio-politico-economic energy nexus -- but linked together by whom? And the emergent surplus energy-mind-environmental ecology nexus? All the information is available. The formation of a new political manifesto started in the 1960s with the New Left but it seems to have been in stasis since. Perhaps this might stimulate the conversation.

According to Nate Hagens: there is 4.5 years of human muscle power leveraged by each barrel of oil. We are all going to be working for a very long time to pay back the debts the possessing classes have built up for us -- with absolutely no marginal utility for ourselves.

We are subsidising our own voluntary slavery unless we develop an emergent ecosocialist and ecosophical alternative to carbon capitalism. We cannot expect paleoconservative carbon relics like Bolton -- or anyone else -- to do it for us. The current political landscape is dominated by a hierarchical, vested interest, carbon aristocracy. We can't expect that to change for our benefit any time ever. Expect the opposite.

BigB says Feb, 2, 2019
Graeber has a point, though. We could already have a post-scarcity, post-production society but for the egregious maldistribution of resources and employment. Andre Gorz said as much 50 years ago (Critique of Economic Reason). Why do we organise around production: it makes no sense but for the relations of production are, and remain, the relations of hierarchical rule. So long as we assign value to a human life on the basis of meritocratic productivity -- we will have dehumanisation, marginalisation, and subjugation (haves and have nots). So why not organisation around care, freedom and play?

Such a solution would require the transversalistion of society and not-full-employment: so that no part of the system is subordinate, and no part is privileged. All systems and sub-ordinate (care) systems would be co-equal, of corresponding value and worth. So, without invoking EROEI, that would go a long way to solve our exergy, waste, pollution, and inequality problems. It is the profligate, unproductive superstructure: supporting rentier, surplus energy accumulating, profit-seeking suprasocieties -- that squanders our excess energy and puts expansive spatio-temporal pressures on already stretched biophysical ecological systems that engenders potential collapse. It is their -- the possessing classes -- assets that are being inflated, at our environmental expense. When it comes to survivability, we cannot afford a parasitic globalised superstructure draining the host -- the ecologically productive base. Without the over-accumulation, overconsumption, and wastage (the accursed share) associated with the superstructure of the advanced economies -- and their cultural, credit, military imperialisms I expect we could live quite well. Without the pressures of globalised transportation networks, and unnecessary military budgets -- the pressure on oil is minimised. It could be used for the 1001 other uses it has, rather than fuelling Saudi Eurofighters bombing Yemeni schoolchildren, for instance. The surplus energy could be used to educate, clothe and feed them instead. That would be a better use of resources, for sure.

If we took stock of what we really have, and what we really are -- a form of spiritual neo-self-sufficiency, augmented and extended into co-mutual care and freedom valorising ecologies we wouldn't need to chase the perceived loss all over the globe, killing everything that moves. The solutions are not hard, they are normative, once we are shocked out of this awful near-life trance state of separationism. Thanks for the link.

crank says Feb, 2, 2019
It seems to me that there are two parallel arguments going on.
One is about social organisation, attitudes towards and policies determining work, money, paid employment, technological development and the distribution of weath.
The other is fundamentally based on the laws of thermodynamics and concerns resource limits, energy surpluses, the role of 'stored sunlight' in producing things and doing work for each other, pollution and projections about these into the future.

I am surprised that Graeber (just as an example) seems to basically ignore the second of these even though he clearly is an incisive thinker and makes good points about the first. It is taken as a given that, theoretically at least, human civilisation could re-organise around a new ethic, transform the economy into a 'caring economy', re-structure money, government and do away with militarism. In terms of what to do now, as an individual, what choices to make, it is disconcerting to me when talk of these ideals seems to ignore those latter questions about overshoot.

I wonder if the egalitarian nature of much of indiginous North American society was inescapably bound with the realities of a low population density, low technology, intimate relationship with the natural world and a culture completely steeped in reverence for Mother Earth.
The talk I hear from Bastani or Graeber along the lines of 'we could be flying around in jet packs on the moon, if only society was organised sensibly' rings hollow to me.

BigB says Feb, 2, 2019
Crank

Welcome to my world! Apart from as a managerial tool, systems thinking has yet to catch on in the wider population. According to reductive materialism: there are two unlinked arguments. According to Dynamic Systems Theory (DST) there is only one integrated argument -- with two inter-connected correlative aspects. We can only organise around what we can energetically afford. Consequently, we cannot organise around what we cannot afford -- that is, global industrialised production with a supervenient elitist superstructure.

Let's face it : ethical arguments carry little weight against organisation around hierarchical rule. The current talk of an ethical capitalism -- in mixed economies with 'commons' elements -- is an appeasement. and distractional to the gathering and ineluctable reality.

The current (2012) EROI for the UK is 6.2:1 -- barely above the 'energy cliff' of 5:1. The GDP 'growth' and bullshit jobs are funded by monetised debt (we borrow around £5 to make every £1 -- from Tim Morgan's SEEDS). From the Earth Overshoot Day website: the UK is in economic overshoot from May 8th onward.

These are indicators that we will not be "flying jetpacks on the moon": even if we reorganise. Everyone, and I mean everyone, will have to make do with less. A lot less. Everything would have to be localised and sustainable. Production would be minimised, and not at all full. Two major systems of production -- food (agroecology) and energy -- would have to be sustainable and self-sovereign. And financialisation and the rentier, service economy? Now you can see why no one, not even Dave the crypto-anarchist, is talking about reality. Elitism, establishment and entitlement do not figure in an equitable future. We can't afford it, energetically or ethically.

So when will the debate move on? Not any time the populace is bought into ideational deferred prosperity. All the time that EROEI is ignored as the fundamental concept governing dwindling prosperity -- no one, and I mean no one, will be talking about a minimal surplus energy future. The magic realism is that the economic affordances of cheap oil (unsustainably mimicked by debt-funding) will return sometime, somehow (the technocratic superfix). The aporia is that the longer the delay, the less surplus energy we will have available to utilise. Something like the Green New Deal -- that has been proposed for around two decades now -- may give us some quality of life to sustain. Pseudo-talk of a Customs Union, 'clean' coal, and nuclear power, will not.

An integrated reality -- along the model of Guattari's 'Three Ecologies' -- of mind, economy, and environment is well, we are not alone, but we are ahead of the curve. The other cultural aporia is that we need to implement such vision now. Actually, about thirty years ago but let's not get depressive!

We are going to need that cooperative organisation around care and freedom just to get through the coming century.

crank says Jan, 31, 2019
As mentioned elsewhere here, Venezualan oil deposits are not all that the hype cracks them up to be. They are mostly oil sands that produce little in the way of net energy gain after the lengthy process of extraction.The Venezuala drama is about the empire crushing democracy (i.e. socialism), not oil. [not that this detracts from Kit's essential point in the article].
The Left (as well as the Right), by and large have not come to terms with the realities of the decline in net surplus energy that is unfolding around the world and driving the political changes that we see. So they still view geopolitics in terms of the oil economy of pre-2008.
The productive economies of Europe are falling apart (check Steve Keen's latest on Max and Stacy -- although even i he doesn't delve into the energy decline aspect).
The carbon density of the global economy has not changed in the 27 years since the founding of the UNFCCC.

The Peak Oil phenomenon was oversimplified, misrepresented and misunderstood as a simple turning point in overall oil production. In truth it was a turning point in energy surplus.
I predict that by the end of this or next year, everyone will be talking about ERoEI. Everyone will realise that there is no way out of this predicament. Maybe there are ways to lessen the catastrophe, but no way to avert it. This will change the conversation, and even change what 'politics' means (i.e. you cannot campaign on a 'new start' or a 'better, brighter future' if everyone knows that that physically cannot happen).
Everyone will understand that their civilisation is collapsing.
Does Bolton understand this?

I dunno.
https://medium.com/insurge-intelligence/brexit-stage-one-in-europes-slow-burn-energy-collapse-1f520d7e2d89

Francis Lee says Jan, 31, 2019
"Does Bolton Understand this/? I think this might qualify as a rhetorical question.
BigB says Feb, 1, 2019
Crank

If you were referring to my earlier comments about Venezuelan extra heavy crude: it's still massively about the oil. The current carbon capitalist world system does not understand surplus energy or EROEI, as it is so fixated on maximal short term returns for shareholders. It can't comprehend that their entire business model is unsustainable and self cannibalising. Which is bad for us: because carbon net-energy (exergy) economics it is foundational to all civilisation. The ignorance of it and subsequent environmental and social convergence crises threatens the systemic failure of our entire civilisation. The Venezuelan crisis affects us all: and is symptomatic of a decline in cheap oil due to rapidly falling EROEI.

I can't find the EROEI specifically for Venezuelan heavy oil: but it is only slightly more viscous than bitumen -- which has an EROEI of 3:1. Let's call it 4:1: the same as other tight oils and shale. Anything less than 5:1 is more or less an energy sink: with virtually no net energy left for society. The minimum EROEI for societal needs is 11:1. Does Bolton understand this? Francis hit the nail on the head there.

Do any of our leaders? No. If they did, a transition to decentralisation would be well under way. Globalised supply chains are systemically threatened and fragile. A globalised economy is spectacularly vulnerable. Especially a debt-ridden one. Which way are our leaders trying to take us? At what point will humanity realise we are following clueless Pied Pipers off the Seneca Cliff -- into globalised energy oblivion?

The rapid investment -- not in a post-carbon transition -- but in increased militarisation, and resource and market driven aggressive foreign intervention policies reveal the mindset of insanity. As people come to understand the energy basis of the world crisis: the fact of permanent austerity and increased pauperisation looms large. What will the outcome be when an armed nuclear madhouse becomes increasingly protectionsist of their dwindling share? Too alarmist, perhaps? Let's play pretend that we can plant a few trees and captive breed a few rhinos and it will all be fine. BAU?

The world runs on cheap oil: our socio-politico-economic expectations of progress depend on it. Which means that the modern human mind is, in effect, a thought-process predicated on cheap oil. Oleum ergo sum? Apart from the Middle East: we are already past the point where oil is a liability, not a viability. Debt funding its extraction, selling below the cost of production -- both assume the continual expansion of global GDP. Oil is a highly subsidised -- with our surplus socialisation capital -- negative asset. We foot the bill. A bill that EROEI predicts will keep on rising. At what point do we realise this? Or do we live in hopium of a return to historical prosperity? Or hang on the every word of the populist magic realism demagogue who promises a future social utopia?

If it's based on cheap oil, it ain't happenin'.

BigB says Feb, 1, 2019
Erratum: less viscous than bitumen.
wildtalents says Feb, 1, 2019
Is it no longer considered a courtesy to the reader to spell out, and who knows maybe even explain, the abbreviations one uses?
Jen says Feb, 1, 2019
EROEI = Energy Returned on Energy Invested (also known as EROI = Energy Return on Investment)

EROEI refers to the amount of usable energy that can be extracted from a resource compared to the amount of energy (usually considered to come from the same resource) used to extract it. It's calculated by dividing the amount of energy obtained from a source by the amount of energy needed to get it out.

An EROEI of 1:1 means that the amount of usable energy that a resource generates is the same as the amount of energy that went into getting it out. A resource with an EROEI of 1:1 or anything less isn't considered a viable resource if it delivers the same or less energy than what was invested in it. A viable resource is one with an EROEI of at least 3:1.

https://en.wikipedia.org/wiki/Energy_returned_on_energy_invested

The concept of EROEI assumes that the energy needed to get more energy out of a resource is the same as the extracted energy ie you need oil to extract oil or you need electricity to extract electricity. In real life, you often need another source of energy to extract energy eg in some countries, to extract electricity, you need to burn coal, and in other countries, to extract electricity you need to build dams on rivers. So comparing the EROEI of electricity extraction across different countries will be difficult because you have to consider how and where they're generating electricity and factor in the opportunity costs involved (that is, what the coal or the water or other energy source -- like solar or wind energy -- could have been used for instead of electricity generation).

That is probably why EROEI is used mainly in the context of oil or natural gas extraction.

BigB says Feb, 1, 2019
wildtalents: Yes, I normally do. But the thread started from, and includes Crank's link that explains it.
Thomas Peterson says Feb, 1, 2019
That's true, Venezuela's 'oil' is mostly not oil.

[Feb 07, 2019] The USA is extracting its proven reserves at a much faster rate than any other large producer so unless new reserves are discovered US production will likely start to decline again within a few years.

Feb 07, 2019 | www.unz.com

Matthias Eckert , says: February 7, 2019 at 10:48 am GMT

@Ilyana_Rozumova Despite huge increases in domestic oil production in the last years the USA is still the second largest net oil importer in the word (behind China).
Also the USA is extracting its proven reserves at a much faster rate than any other large producer (a pattern it also had in the past, leading to high fluctuation in its production) so unless new reserves are discovered US production will likely start to decline again within a few years.
Winston2 , says: February 7, 2019 at 1:37 pm GMT
@Ilyana_Rozumova Condensate, not oil. Only good for gas or lighter fluid. It may be called oil but that's a deliberate misnomer.

Only financial engineering makes it appear profitable. Its a money losing psychopaths power play, not a business. Without a heavy real oil to blend it with its useless, heavy oil is where Venezuela comes in.

Tom Welsh , says: February 7, 2019 at 3:38 pm GMT
@Ilyana_Rozumova "Main factor here is that US due to fracking become self sufficient, what actually nobody could foresee. Just a bad luck".

Bad luck for the USA. They have fallen into an elephant trap, because fracking has already become unprofitable and is only being financed by ever-increasing debt.

Admittedly this gives them some advantage, but only in the very short term.

Of course, it doesn't really matter – in the short to medium term – whether fracking is profitable or grossly unprofitable. They can still pay for it by printing more dollars, as long as the "greater fools" (or heavily bribed officials) in other countries go on accepting dollars.

Vidi , says: February 7, 2019 at 9:10 pm GMT
@Wally

"America's energy security just got a lot more secure . Located in the Wolfcamp Shale and overlying Bone Spring Formation, the unproven, technically recoverable reserves are officially the largest on the planet."

None of these breathlessly optimistic articles say how expensive it will be to get this oil. If a dollar's worth of oil costs you more than a dollar to recover, you are obviously losing in the deal. If you print the dollars, your entire economy loses.

[Feb 07, 2019] Saudi Arabia cuts oil output by about 400,000 bpd in January sources

Feb 07, 2019 | finance.yahoo.com

DUBAI/LONDON (Reuters) - Saudi Arabia, the world's top oil exporter, cut its crude output in January by about 400,000 barrels per day (bpd), two OPEC sources said, as the kingdom follows through on its pledge to reduce production to prevent a supply glut.

Riyadh told OPEC that the kingdom pumped 10.24 million bpd in January, the sources said. That's down from 10.643 million bpd in December, representing a cut that was 70,000 bpd deeper than targeted under the OPEC-led pact to balance the market and support prices.

The Organisation of the Petroleum Exporting Countries, Russia and other non-OPEC producers - an alliance known as OPEC+ - agreed in December to reduce supply by 1.2 million bpd from Jan. 1.

The agreement stipulated that Saudi Arabia should cut output to 10.311 million bpd, but energy minister Khalid al-Falih has said it will exceed the required reduction to demonstrate its commitment.

[Feb 07, 2019] OPEC's Oil Exports to U.S. Fall to Five-Year Low in January

Feb 07, 2019 | finance.yahoo.com

Crude shipments to the U.S. from OPEC and its partners fell to 1.41 million barrels a day in January, the lowest in five years, according to data from cargo-tracking and intelligence company Kpler. Shrinking Iraqi imports and deep output cuts by Saudi Arabia fueled the decline

[Feb 05, 2019] Venezuelan Oil Exports Plunge On 'Harsher' Sanctions

So Trump imposed sanction on the USA too. Of he hopes that Strategic petroleum reserve will compensate for shortages... If Venezuela color revolution develops into Libya scenario, which they could oil output can be suppressed for years to come. In other words Trump really has chances to became Republican Obama.
OilPrice.com

The Wall Street Journal reported oil storage is "filling up" in Venezuela because of a lack of buyers.

Related: Wood Mac: Venezuela's Oil Output To Fall Below 1 Million Bpd

Moreover, not only are the effects of the sanctions more far-reaching, but also more immediate than first thought. At first, the U.S. seemed to exempt shipments that were underway, outlining a sort of phased approach that would allow a handful of American refiners to gradually unwind their oil purchase from Venezuela. The phased approach, which was supposed to be extended into April, would help "to minimize any immediate disruptions," U.S. Secretary of Treasury Steven Mnuchin said in late January.

But that now does not appear to be what is unfolding. PDVSA has demanded upfront payment, likely because it fears not being paid at all or having the revenues steered to the opposition. Indeed, the U.S. effort to steer PDVSA and its revenues into the hands of the U.S.-backed opposition leader Juan Gauidó appears to be a decisive turning point.

Oil tankers linked to Chevron, Lukoil and Respsol are delayed, redirected or sitting offshore because of lack of payment. The WSJ says that several of those tankers had recently sent oil to Corpus Christi, Texas, but are now anchored off the coast of Maracaibo sitting idle. "This is an absolute disaster," Luis Hernández, a Venezuelan oil union leader, told the WSJ. "There's almost no way to move the oil."

Unable to sell any oil, Maduro's regime could quickly run out of cash. The result could be a humanitarian catastrophe, a merciless and destructive objective that the Trump administration seems to have in mind. The U.S. government is essentially betting that by driving the country into the ground, the military and the people will turn on Maduro. It could yet turn out that way, but it could also deepen the misery and exact an unspeakable toll on the Venezuelan population, the very people the Trump administration says it is trying to help.

In the meantime, oil exports are likely heading into a freefall. The WSJ says that labor problems, including "mass defections of workers" are accelerating declines. PDVSA could soon run out of refined fuel.

Officials with knowledge of the situation told the WSJ that Venezuela's oil production has likely already fallen well below 1 million barrels per day (mb/d), down more than 10 percent – at least – from December levels.

Related: OPEC's Oil Princes Are Fighting For Survival

Wood Mackenzie estimates that production probably stands a little bit higher at about 1.1 mb/d, but that it could soon fall to 900,000 bpd.

... ... ...

That would push up oil prices significantly. But the U.S. government has blown past the point of no return, leaving it with no other options except to escalate. That means that Venezuela is set to lose a lot more oil than analysts thought only two weeks ago .

[Feb 05, 2019] Interesting to note that a part of Trump's beat-down of the Venezuela little people is the ban on the 120,000 b/d of dilutent last week. That will completely shut down Venezuella exports

Will loss of Vezuellian oil exports to the USA be compensated from the USA strategic reserve? Who will compensate this oil? Canada ? Or Trump administration decoded that temporary rise of oil prices is OK in view of more strategic goal ?
Notable quotes:
"... As for Venezuela's over-reliance on oil exports to support its economy, this is the result of past government policies before Chavez came to power. The US treated Venezuela as a petrol station and pro-US governments in the country turned it into a petrol station. ..."
Feb 05, 2019 | www.moonofalabama.org

PavewayIV , Feb 3, 2019 8:33:23 PM | link

Bart Hansen@20 - Oil production costs are complex, secret and mostly lies. With that caveat, Venezuela was thought to have about $10 - $15 production costs on average. That includes their light and medium crude, and zero investment in repair of their distribution networks.

Well over half of Venezuela's reserves are Orinco extra-heavy, sour crude. Essentially tar sands, but buried 500m - 1500m deep that require solvent or steam extraction. So (guess) maybe $30-range/bbl for production. Those tar sand oils produced are so heavy that they need pre-processing and dilution before they can be refined or exported. Naphtha or other refined products are used as dilutent and cost maybe $55/bbl today, but were around $75/bbl last October.

U.S. refineries were pretty much the only ones paying cash for their 500,000 b/d of Venezuelan crude. Trump's sanctions not only ban those imports, but also ban the 120,000 b/d of naphtha and other dilutents we sold them.

Interesting to note that part of Trump's beat-down of the Venezuela little people is a ban on the 120,000 b/d of dilutent last week. That will completely shut down their exports. They could find another source of naphtha, but that source will be looking for $6.6 million a day hard cash for it.

Maduro needs to sell Venezuela's gold to buy naphtha to export oil for ANY revenue. The $2.5 billion the Bank of England can't find and won't deliver is meant to hasten the food riots and CIA-orchestrated coup. But Mercy Corps is setting up concentration camps on the Colombian border and we're delivering food aid, so the U.S. is really the hero, here. God bless America! Obey, or die.

Jen , Feb 3, 2019 7:21:08 PM | link
Red Ryder @ 30: Venezuela's economy is as much ruined by US economic sanctions against the country and (at US behest) Saudi Arabia's flooding of the global oil market that sent oil prices down in order to crash the economies of other countries like Iran and Russia that were presumed to be dependent on oil exports, as by mismanagement or poor leadership on Chavez or Maduro's part.

On top of that, major food importers and producers (several of which are owned by companies or individuals hostile to Chavez and Maduro) have been withholding food from supermarkets to manipulate prices and goad the public into demonstrating against the government.

As for Venezuela's over-reliance on oil exports to support its economy, this is the result of past government policies before Chavez came to power. The US treated Venezuela as a petrol station and pro-US governments in the country turned it into a petrol station.

Chavez did try to encourage local food production and carried out some land redistribution to achieve this. But his efforts did not succeed because importing food was cheaper than producing it locally and farm-workers apparently preferred jobs in the oil industry that paid better and were more secure.

I do not know how the collectives were organised, whether they had some independent decision-making abilities or not, or whether they were organised from top down rather than bottom up, so I can't say whether their organisational structures and the internal culture those encouraged worked against them.

[Feb 04, 2019] Citi expects Brent crude to continue rising into the mid-$60 range and hit $70 before year end

Feb 04, 2019 | finance.yahoo.com

The bank expects oil supply to tighten in the first quarter as top exporter Saudi Arabia cuts production , but Citi's Ed Morse also forecasts a soft spot for demand in the opening months of 2019. Further complicating matters are a series of geopolitical and market dramas that will play out through the beginning of May.

This follows a three-month period that saw oil prices spike to nearly four-year highs as the market braced for U.S. sanctions on Iran. Prices then tumbled more then 40 percent to 18-month lows, blowing up long-held trading strategies and forcing drillers to rethink their 2019 budgets.

"The volatility every year is a good $20 to $25 a barrel between low and high," Morse said. "December was kind of the nightmare for the world where the swings were $50 at a low, $86 at a high and $68 for the average of Brent."

... ... ...

Citi expects Brent crude to continue rising into the mid-$60 range and hit $70 before year end. That will be enough to keep in play another wild card: surging U.S. oil production.

[Feb 04, 2019] The REAL Reason The U.S. Wants Regime Change in Venezuela.

Feb 04, 2019 | www.unz.com

Agent76 , says: February 3, 2019 at 7:29 pm GMT

Feb 2, 2019 The REAL Reason The U.S. Wants Regime Change in Venezuela. The U.S. and its allies have decided to throw their weight behind yet another coup attempt in Venezuela. As usual, they claim that their objectives are democracy and freedom. Nothing could be farther from the truth.

Feb 3, 2019 Venezuela's Oil Enough for World's 30 Year Energy Needs

The long bankrupt fiat financial system is pushing the Deep State to target Venezuela for the latter's natural resources that dwarfs that of its satellite province Saudi Arabia.

https://geopolitics.co/2019/02/03/venezuelas-oil-enough-for-worlds-30-year-energy-needs/

[Feb 04, 2019] Did Trump administration sold part of the US stratagic reserve to bring oil prices down?

Feb 04, 2019 | www.unz.com

renfro , says: January 30, 2019 at 11:59 pm GMT

Well people you need to explore this move to take over Venezuela in the context of what having that oil control will mean for the US and Israel in the increasingly likely event we blow up Iran and up end the ME for Israel.

Despite Trump selling off half of our US oil reserves last year .. https://www.reuters.com/article/us-usa-oil-reserve/u-s-sells-11-million-barrels-of-oil-from-reserve-to-exxon-five-other-firms-idUSKCN1LG2WT ..the US doesn't currently, at present anyway, need to control Venezuela's oil .

So what could happen that might make control of oil rich Venezuela necessary? Why has Venezuela become a Bolton and Abrams project? Why is Netanyahu putting himself into the Venezuela crisis ?

We, otoh, would need all the oil we could get if we blew up the ME, specifically Iran, figuratively or literally. The US signed a MOU with Israel in 1973 obligating us to supply Israel with oil ( and ship it to them) if they couldn't secure any for themselves.

[Feb 04, 2019] Maybe the big oil will buy up some more of the weaker Permian players, which could slow down the insane growth; and make the Permian more of a feeder for their refineries than an export source

Notable quotes:
"... Big oil has its benefits, and this benefit fits into big oil's need for future existence. When the price of oil goes up, then what's the projected stock price of Exxon or Chevron? They will be back into the mode they were in decades ago, start to finish. ..."
Feb 04, 2019 | peakoilbarrel.com

Guym x Ignored says: 01/30/2019 at 6:04 am

https://www.bizjournals.com/houston/news/2019/01/29/exxon-reportedly-to-move-forward-on-major-beaumont.amp.html

Motiva had previously upgraded refinery capacity to accept light oil, Exxon keeps adding more, and now Chevron will, no doubt, expand.

Maybe the big oil will buy up some more of the weaker Permian players, which could slow down the insane growth; and make the Permian more of a feeder for their refineries than an export source. I really can't imagine that they are spending billions on refineries with the expectation that it may start to expire in five years. Exxon and Chevron are already two of the top ten producers in the Permian, and they can get bigger, if they want to.

Gobbling up most of these producers would only amount to a snack for them. And doing it while the pure Permian producers a floating in the doldrums of 2019 would fit perfectly.

That could affect projections for US shale growth. The refiners would look at it over a longer term usage, and not how much they can ship out. However, it could still lower net imports. Win, win.

Thus, possibly saving West Texas from extinction, and move away from boom or bust some. Add pipelines to the East and West coast, and upgrade refineries, and you have a longer term solution.

With Canadian and Mexican heavy oil and sprinkle in some EOR, we could get by for a longer period of time. Peak oil is a meaningful event, but it does not, absolutely, have to affect the US for a while.

On a different topic, a Japanese company is interested in becoming an Eagle Ford player. Japan needs LNG. Eagle Ford has a largely untapped huge gas window. So, even if we do not use the planned upgraded ports for oil, we may still be using them for LNG.

Ok, it's only a dream, now, but the parts are beginning to come together. Big oil has its benefits, and this benefit fits into big oil's need for future existence. When the price of oil goes up, then what's the projected stock price of Exxon or Chevron? They will be back into the mode they were in decades ago, start to finish.

Stephen Hren x Ignored says: 01/30/2019 at 11:29 am
This rings true to me. The big boys have few other options left for expansion (Guyana, Mexico and/or Brazil if they can work their way through the corruption) other than the Permian. Oil prices are likely to remain volatile for the foreseeable future, generating occasional buying opportunities for companies with lots of cash on hand. Kind of the way the tech giants like Apple and Amazon and Facebook bought up all the small fry app/tech companies for lack of anything better to do with their money. If this happens I would expect a slower pace of development to emerge for tight oil over the next decade and a longer tail.
Guym x Ignored says: 01/30/2019 at 2:04 pm
Yeah, that's what I'm thinking. Make peak closer to the time period of somewhere pretty close. I think we better move, we may be sitting to close to that smelly fan.

https://www.bloomberg.com/news/articles/2018-03-07/was-chevron-smart-or-just-lucky-in-the-permian-basin

https://corporate.exxonmobil.com/en/company/multimedia/the-lamp/exxonmobil-continues-to-increase-permian-basin-acreage

Chevron's holdings are the size of Yellowstone, and Exxon is not far behind. Will they pick up any additional acreage if the get a good buy? Does a dog bark?

Guym x Ignored says: 01/30/2019 at 6:21 pm
https://oilprice.com/Energy/Energy-General/Chevron-Looks-To-Double-Permian-Production-By-2022.html

Plans on growth in the Permian, " .and an increase in net acreage."

Competition with 2 800lbs gorillas?
https://www.houstonchronicle.com/business/amp/Permian-land-rush-is-over-leaving-big-players-to-12842858.php

This says nothing about the quality of rock, but lists acreage by the top holders. Oxy, ConocoPhillips, and EOG will be more conservative in development, and are not really prime acquisition targets. But adding them and Exxon and Chevron, you get most of the acreage. Energen and Diamondback have merged.

Synapsid x Ignored says: 01/30/2019 at 6:51 pm
Thanks Guym,

This is very helpful.

John x Ignored says: 01/31/2019 at 12:37 pm
The state of oil and gas in Midland is healthy, according to Tim Leach CEO of Concho.

https://www.mrt.com/business/oil/article/Concho-CEO-Permian-oil-is-
economic-engine-to-13575074.php#item-85307-tbla-5

Leach, chairman and chief executive officer of Concho Resources, cited statistics indicating Permian Basin crude production is expected to climb from the current 4 million barrels a day to 6 million barrels a day in just six years. That, he told the sold-out crowd at the Horseshoe, would comprise 7 percent of total world oil production and 40 percent of U.S. production. In addition, the Permian Basin could see 45,000 new high-paying technical jobs on top of the 50,000 jobs that have been created since about 2000.

"Companies operating here today will be investing $50 billion a year in drilling and completing wells," leading to over $1 trillion in spending in that same timeframe, he said. That has created numerous opportunities throughout the Permian Basin, but also significant challenges, he said.

When he and other leaders of local oil companies review their business plans and consider their greatest concerns, he said it's not sand or pipeline capacity or technology. "Collectively, they say it's schools, roads, doctors and housing."

GuyM x Ignored says: 01/31/2019 at 3:45 pm
Ok. Concho managed to eek out a loss the third quarter. Good source of info.

[Feb 04, 2019] Return on investment is the primary problem with shale: the majority of oil companies producing shale oil today are doing it at a loss

The problem is that the decline of the conventional fields does not sleep...
Notable quotes:
"... If it takes more energy to extract the oil from shale than you get from the oil you pump out then it is a sink, not a source. For instance it would be extremely difficult to extract oil from offshore shale. You would have to ship the sand out by barge, build huge platforms for every well to hold all that fracking equipment and so on. ..."
"... Return on investment is the primary problem with shale. If it cost more in time and energy than you receive from the extracted producte, it will stay in the ground. Anyway, that's just my unprofessional opinion. Some of the professionals on this blog may have a better educated opinion. ..."
"... New shale production, which is subject to extraordinarily fast decline in and of it self, would have to be brought online fast enough to offset both its own decline PLUS the decline of the worlds giant conventional legacy oil fields. ..."
"... Even if it's profitable to do so, and in large enough quantities, at some particular price, this does not necessarily mean that it will be possible to muster enough capital, equipment, skilled labor, and political will to make it happen FAST ENOUGH to offset conventional legacy oil declining production. ..."
"... I have read from news lately a more strict requirements from investors, banks, hedge funds makes it reasonable that investment in shale oil compeared to 2018.budget will be reduced by 19%. ..."
"... I doubt there will be lots of investments in US shale with oil price in range 50-60 USD, because there is significant documentation only a very limited part ( decreasing) within core area is profitable as of now. Beside this a oil price in range 50-60.WTI or 55- 65 usd each barrel Brent is not enough to pay the cost of exploration drilling offshore, build new infra structure. ..."
Feb 04, 2019 | peakoilbarrel.com

Davo , 01/29/2019 at 4:25 pm

New here, been lurking for a while. I'm a geologist with a small oil and gas exploration and operating company. We explore conventional only. I have however read all your predictions of peak oil etc. but don't you think that given higher prices, other basins world wide that are similar to the Permian could be successfully exploited for years to come holding off peak oil for decades? I'm no expert but I would venture there are hundreds of basins that could as good or better than the Permian. Just in the U.S., we have the Permian, Bakken, Niobrara, Eagleford and about a dozen others. Surely our success could be duplicated on a global scale if the price was right.
Guym , 01/29/2019 at 5:58 pm
There is the Vaca Muerte in Argentina, but probably under the scale of the Eagle Ford. There are a LOT of contraints holding the dead cow back. A lot of countries I have heard of that have gas potential, e.g. China, even UK. But, I have not heard of a lot of oil potential. The way my limited understanding goes, the play has to be new enough on the geological age, to still have oil. As in, the Eagle Ford has three windows which depend on geological age, and pressure. The oil window is younger, the condensate and gas windows are older. I think the Permian will have areas, too. But, I received my geology degree from a cracker jacks box 🤡 but your last sentence may hold some validity. For that matter, I don't think shale has given up completely after the first go round, if the price is right. Would that delay peak to another date? Quien sabe. Money talks. What price? I know I would keep an ICE around for long trips at $200 a barrel for the convenience. Food may be higher, though.
Timthetiny , 01/30/2019 at 1:50 pm
Speaking as a geologist, this is incorrect. Thermal maturity depends on far more than age. The Utica gas window is 300 million years older than the eagle fords gas window, just for example.
Guym , 01/30/2019 at 2:01 pm
I knew I'd be wrong on that, just repeating what I read on a non-technical site. Thanks
Ron Patterson , 01/29/2019 at 6:16 pm
Yes, of course there are more shale sources out there. But perhaps not as many as you think. All reservoir rock is not so tight as to hold most of its oil in place. There is, or rather was, lots of oil in West Texas but not much shale oil. The same is true for Southern California. I suspect most of the Middle east is similar.

Also there is the cost. If it takes more energy to extract the oil from shale than you get from the oil you pump out then it is a sink, not a source. For instance it would be extremely difficult to extract oil from offshore shale. You would have to ship the sand out by barge, build huge platforms for every well to hold all that fracking equipment and so on.

There are lots of shale oil sources in Russia. And if prices get high enough, they will probably try to extract it. Imagine hauling train loads of sand to the north slope of Alaska, then trucking it over the tundra by truck to every well. You would have similar problems in Western Siberia.

Return on investment is the primary problem with shale. If it cost more in time and energy than you receive from the extracted producte, it will stay in the ground. Anyway, that's just my unprofessional opinion. Some of the professionals on this blog may have a better educated opinion.

Phil Stevens , 01/29/2019 at 9:58 pm
"If it cost more in time and energy than you receive from the extracted producte, it will stay in the ground."

@Ron Patterson, you seem to be saying that extraction will go forward as long as there is the potential for *any* marginal return, at least expressed in money if not in EROEI. So for example, as long as I can charge $101 for a barrel of oil that cost me $100 to get out of the ground, I'll keep doing it (or someone else will). Do you really think this is the case, or is there a threshold/floor below which it won't make economic sense due to produce oil? Due perhaps to knock-on factors in the larger economy? Obviously I'm no expert on any of this, so please take it easy on me in any replies. Thanks!

Ron Patterson , 01/30/2019 at 7:16 am
Phil, I really have no idea at what point oil companies will decide it is not worth the effort due to low profits or other causes, they will cease drilling. However it must be noted that a majority of oil companies producing shale oil today are doing it at a loss. Of course they all expect to be making money sometime soon. They expect prices to rise so they are just trying to hang on until they are profitible.

So you see it is just not that simple. They may produce oil at a loss for some time before they fold. But obviously they cannot produce oil at a loss forever. There are many factors that govern their decision to fold their tents and walk away. I think it is impossible to predict exactly at what or when that point is. At least it is beyond my ability to do so.

OFM , 01/30/2019 at 7:52 am
Hi Ron,

I don't have any better idea how much shale oil is out there, or whether it can be produced profitably, than you do. But I will add this much to the discussion. Even if it is out there , and can be produced profitably, this is no guarantee that shale oil can prevent peak oil happening.

New shale production, which is subject to extraordinarily fast decline in and of it self, would have to be brought online fast enough to offset both its own decline PLUS the decline of the worlds giant conventional legacy oil fields.

Even if it's profitable to do so, and in large enough quantities, at some particular price, this does not necessarily mean that it will be possible to muster enough capital, equipment, skilled labor, and political will to make it happen FAST ENOUGH to offset conventional legacy oil declining production.

It's been a while since I paid much attention to the actual numbers, but I know you are well acquainted with them.

So what's your estimate, these days, of the conventional legacy oil decline rate? Have you raised it or lowered it recently?

Freddy , 01/30/2019 at 8:09 am
As I have read from news lately a more strict requirements from investors, banks, hedge funds makes it reasonable that investment in shale oil compeared to 2018.budget will be reduced by 19%.

One significant player will reduce their number if riggs from 24 to 18 as they expect oil price WTI in 2019 to be in mid 50 usd range.

To me it seems the confident among investors to US shale have changed significant espesialy 4th quartile of 2018. Now they only want to support projects that give cash return , seems they are tiered of promises as there have been to much of and shale oil depth have never been higher.

Since oil demand is linked to groth in world economy that is also same for interest of liability. EIA , and some other analyst like Rystad sees US shale production in 2019 will continue with strong increase and predict we only have seen the beginning. After working within oil and gaz projects in many years I know the oil majours dont want to loose money ,when a project seems not profittable they stop until oil price incresse or they get cost down.

I doubt there will be lots of investments in US shale with oil price in range 50-60 USD, because there is significant documentation only a very limited part ( decreasing) within core area is profitable as of now. Beside this a oil price in range 50-60.WTI or 55- 65 usd each barrel Brent is not enough to pay the cost of exploration drilling offshore, build new infra structure.

[Feb 04, 2019] Production is likely to head south in 2019

Notable quotes:
"... Production is likely to head south, so nobody will get it. Perfect storm. Iran sanctions, Saudis are going to cut to 10.1 instead of 10.3, Venezuela production to plummet, and US oil is on a hiatus. What a glut. ..."
Feb 04, 2019 | peakoilbarrel.com

Guym x Ignored says: 01/29/2019 at 4:38 pm

https://www.cnbc.com/amp/2019/01/28/-venezuela-crisis-oils-ticking-time-bomb-to-detonate-analysts-say.html

Production is likely to head south, so nobody will get it. Perfect storm. Iran sanctions, Saudis are going to cut to 10.1 instead of 10.3, Venezuela production to plummet, and US oil is on a hiatus. What a glut.

[Feb 04, 2019] Global outages boost oil prices

Feb 04, 2019 | www.rt.com

Oil prices are on track for strong gains this week, and the price increases are not only the result of the crisis in Venezuela. The oil market received a boost from the US Federal Reserve this week, which signaled on Wednesday that it would essentially suspend its plans to hike interest rates this year. Fed chairman Jerome Powell said that economic growth remained "solid" but that the central bank had "the luxury of patience" when deciding on further rate hikes. That is a big change from prior guidance, in which the Fed very clearly outlined multiple rate increases in 2019.

"The case for raising rates has weakened somewhat," Powell said. Slowing growth in China and Europe, a weakening housing market, tepid inflation – these are not exactly the ingredients that call for aggressive rate tightening.

Read more Saudi Arabia: We'll pump the world's very last barrel of oil Saudi Arabia: We'll pump the world's very last barrel of oil

The announcement contributed to strong gains for oil prices on Wednesday and Thursday. At the time of this writing, WTI was trading in the mid-$50s, with Brent above $62 per barrel, both close to two-month highs.

READ MORE: Russia vows to defend its Venezuelan oil assets

A more dovish position from the Fed boosts the bullish case for oil in two ways. First, lower-than-expected interest rates will provide a jolt to the economy. Stock markets rose on the news. But second, a softer rate outlook also undercuts the US dollar a bit. A weaker dollar stokes crude oil demand in the rest of the world, and historically the dollar has had an inverse relationship with oil prices.

Meanwhile, the oil market received a more direct boost this week on news that Saudi Arabia slashed shipments to the United States. The US has the most transparent and up-to-date data on the oil market, which include weekly releases on production levels, imports and exports, and inventories. That kind of visibility is not readily available in most places around the world.

As a result, Saudi Arabia appears to be deliberately targeting that data. By reducing shipments to the US specifically, Riyadh can help create the appearance of a tightening oil market. Saudi shipments to the US dropped by 528,000 bpd last week to just 442,000 bpd, the lowest weekly total in more than two years.

Also on rt.com Oil markets could see deficit in 2019

More to the point, OPEC's production declined by 890,000 bpd in January, according to a Reuters survey, the largest monthly decline since early 2017 (the month that the first round of OPEC+ production cuts took effect). Iraq produced above its production ceiling, but aside from that, the cartel is well on its way to implementing the production curbs.

In fact, there is suddenly a remarkable confluence of events pushing oil in a bullish direction. First and foremost are the OPEC+ production cuts of 1.2 mb/d that are phasing in. But beyond that, US shale is starting to slowdown, and while output is still expected to grow this year, the increase could be the smallest in years.

Read more Iran announces oil discovery in untapped region Iran announces oil discovery in untapped region

Then there are the supply outages. Libya lost some output unexpectedly in December, with some of its production still offline. Iran sanctions waivers are set to expire in May, and the US hopes to further cut into Iranian oil exports. The new sanctions on Venezuela threaten to create yet another major source of supply outages.

In fact, when considering that OPEC+ is determined to keep 1.2 mb/d of supply off of the market, and painful US sanctions on Venezuela and Iran threaten to shut in even more output, it's pretty amazing that Brent crude is only trading at $62 per barrel. The Fed backing off interest rate hikes is the cherry on top.

Traders and investors are starting to wake up to this bullish sentiment. "The market is more convinced that there will be aggressive production cuts and the macro picture has improved a bit. That's positive for prices going forward," Jean-Louis Le Mee, CEO of London-based oil hedge fund Westbeck Capital, told the Wall Street Journal.

Another investor echoed that sentiment in comments to the WSJ. "The Saudis are sincere about higher oil prices, they need to balance their budget. The OPEC cuts will lower stocks so I'm pretty bullish," said Mark Gordon, portfolio manager at the Ascent Oil Fund.

Oil prices are back up to where they were in November, and significant outages from Venezuela in the short run could pave the way for more price increases.

[Feb 04, 2019] What if this is the beginning of the Senneca-Cliff?

Feb 04, 2019 | peakoilbarrel.com

Karl Johnson

x Ignored says: 01/29/2019 at 10:11 am
Whats the beginning of the Senneca-Cliff?
GuyM x Ignored says: 01/29/2019 at 11:50 am
I think it would be this year, if not last year. Ron has said 2019 at one time. Dennis thinks later, around 2025, as I recall.
Hickory x Ignored says: 01/29/2019 at 2:14 pm
Karl- I see that you asked 'what' rather than when.
Seneca Cliff refers to a very rapid decline in a feature (such as global oil production) after it has achieved a peak. This is as opposed to a very slow decline.
Obviously for oil, a fast decline would be catastrophic.

https://cassandralegacy.blogspot.com/2011/08/seneca-effect-origins-of-collapse.html

Guym x Ignored says: 01/29/2019 at 4:00 pm
According to the chart from iRA I posted below, we would be on a Seneca cliff now, without shale oil. Just flattened the drop for awhile.
GuyM x Ignored says: 01/29/2019 at 11:39 am
https://www.iea.org/newsroom/news/2018/november/crunching-the-numbers-are-we-heading-for-an-oil-supply-shock.html

US production will be close to flat 2019, and if ports are not improved much until late 2020, then 2020 will not be great. After that, I don't see it catching up.

Han Neumann x Ignored says: 01/31/2019 at 10:58 pm
As stated many times on 'theoildrum', State of the art EOR projects deplete oilfields, who without EOR would go in terminal decline much earlier, very rapidly. So a world oilproduction cliff cannot be ruled out, especially if money reserves from oil companies dry up.
Dennis Coyne x Ignored says: 02/01/2019 at 10:32 am
Han Neumann,

Oil prices are likely to rise if there is a shortage of oil, this will mean oil companies will have plenty of financial resources as long as demand is sufficient to consume the oil produced. Not suggesting there will not be a decline, just unlikely there will be a cliff unless oil prices drop, so far there is no evidence of a cliff and given World stock level trend, prices are unlikely to drop further and are more likely to increase in the future.

Han Neumann x Ignored says: 02/03/2019 at 1:33 pm
Dennis,

A cliff is unlikely to happen, I agree.

But to repeat a cliché: depletion never sleeps. Already about fifteen years ago EOR projects were started that extracted oil from (quite) 'past peak' or 'on plateau production' oilfields. EOR projects in case of 'quite past peak' fields, to get 'the last recoverable' barrel out resulting in oil production/day far less than peak production.

I know, the recoverable quantity increases with rising oilprices and better extraction techniques, but still the production/day way past peak will be much less than on peak.

What will happen when oilprices don't increase a lot for the next ten years, for a combination of reasons ?

At a certain point in time all the money in the world couldn't prevent world production decline and the further that point will be in the future, the steeper will be the decline I think. So better sooner than later oilprices begin to increase significantly, to buy some time for the transition to EV's, etc.

I am not an expert in engineering nor in geology, far from that, just expressing a feeling that I got after having read the many posts on theoildrum regarding this matter.

https://www.forbes.com/sites/rrapier/2018/03/23/is-the-world-sleepwalking-into-an-oil-crisis/#4691a69d44cf

[Feb 03, 2019] Venezuellla as a patch to ailing US frakers

Notable quotes:
"... US need for heavy oil is also due to declines in conventional oil production. Fracking "oil" ( high in condensates) has been used to mask the peak (real) oil declines and also has a lower energy content/barrel and must be blended with heavy oil for the refineries to process it. Thus, "Prices of heavier U.S. grades like Mars Sour, an offshore medium U.S. crude, and Heavy Louisiana Sweet crude have risen as buyers scramble for supply". ..."
"... Mars currently trades at a premium to U.S. crude at $58.19 vs $53.69 for West Texas Intermediate (WTI)". Currently, the US also imports 500,000 barrels of Venezuelan crude a day to meet refinery blending requirements. ..."
"... All other shale fracking regions than the Permian have peaked or are in decline as shown by http://aheadoftheherd.com/Newsletter/2018/Shale-is-dead-long-live-conventional-oil.pdf ..."
Feb 03, 2019 | www.moonofalabama.org

Krollchem , Feb 2, 2019 7:24:19 PM | link

Update on comment Krollchem@176

This article by Nafeez Ahmed connects the dots that have led to the Venezuela's current political and economic crisis. The factors include:
(1) predatory global capitalism (see Michael Hudson's work);
(2) government mismanagement e.g. price controls;
(3) corruption at all levels (insiders);
(4) droughts (El-Nino), especially in 2015 and tied to lower hydroelectric electricity production;
(5) oil price flux;
(6) US destabilization efforts;
(7) privatization of oil resources;
(8) low Energy Return on (energy) Invested (EROI);
(9) US use of (corporate socialism) subsidized oil prices as a weapon to punish real oil producers
https://oilprice.com/Energy/Energy-General/Warning-Signs-Flash-For-US-Shale.html
(10) Energy waste by gas flaring, which is also common in the US.
https://medium.com/insurge-intelligence/venezuelas-collapse-is-a-window-into-how-the-oil-age-will-unravel-f80aadff7786
https://www.texastribune.org/2019/01/24/report-oil-producers-flaring-more-natural-gas-texas-reported/

He neglects other factors such as:
(1) poor soil management practices;
(2) demographics such as some 3 million Columbian citizens fleeing the Fascist Columbian military attacks and putting extra stress on the social programs;
(3) Increasing US needs for Venezuela heavy crude to blend with the light fractions coming from fracking operations (e.g. Eagle Ford light "oil" condensates;
(4) US military need for War to support funding levels (e.g. Smidley Butler's "war is a racket";
(5) batshit crazy neocon and neoliberal ideology and world domination.

The EROI issue is worse that many consider. See Gail Tverberg article "How the Peak Oil Story Could Be "Close," But Not Quite Right". The article points out that wellhead costs do not capture the downstream costs of production and tax capture that bust further reduce the EROI.
https://www.nakedcapitalism.com/2019/01/peak-oil-story-close-not-quite-right.html

US need for heavy oil is also due to declines in conventional oil production. Fracking "oil" ( high in condensates) has been used to mask the peak (real) oil declines and also has a lower energy content/barrel and must be blended with heavy oil for the refineries to process it. Thus, "Prices of heavier U.S. grades like Mars Sour, an offshore medium U.S. crude, and Heavy Louisiana Sweet crude have risen as buyers scramble for supply".

Mars currently trades at a premium to U.S. crude at $58.19 vs $53.69 for West Texas Intermediate (WTI)". Currently, the US also imports 500,000 barrels of Venezuelan crude a day to meet refinery blending requirements.
https://uk.reuters.com/article/uk-venezuela-politics-usa-oil/venezuelan-oil-exports-to-u-s-still-a-primary-source-of-cash-idUKKCN1PJ2D1
https://www.bloomberg.com/news/articles/2018-10-17/permian-drillers-are-said-to-sell-new-lighter-crude-oil-grade
https://btuanalytics.com/quality-matters-api-gravities-of-major-us-fields/
https://oilprice.com/Energy/Energy-General/Gasoline-Overproduction-Leads-To-Negative-Margins.html

All other shale fracking regions than the Permian have peaked or are in decline as shown by http://aheadoftheherd.com/Newsletter/2018/Shale-is-dead-long-live-conventional-oil.pdf

Added to this EROI problem is that the new US energy production hope from the Permian basin is beset with water shortages. https://oilprice.com/Energy/Energy-General/Is-The-Permian-Bull-Run-Coming-To-An-End.html

The economics of the US fracking light oil condensates industry is much worse when you consider the offloading of pollution costs (drinking water), health effects, wear and tear of highways from trucking the oil, water and fracking sands (one pound/barrel), climate change from massive methane flaring, volatile organic compounds (VOC) release and earthquake damage from deep injection of the water cut fluids.

[Jan 31, 2019] Venezuela color revolution plot thickens

Notable quotes:
"... UN should be probing Washington and allies for regime-change crimes Identical condemnations from the US and allies and the synchronicity show that Venezuela is being targeted for regime change in a concerted plot led by Washington. ..."
"... It is so disappointing that Americans yet to come to realization that this criminal Jewish Mafia does not standing at the end of the old republic. He is DEEPLY involved, but his STYLE is different. He kills and terrorize the same as Regan, Carter, Clinton, Bush, Obama who have killed millions of people. His sanction is the KILLING MACHINE to topple governments TO STEAL THEIR RESOURCES FOR THE DUMMIES. I have NO respect for the liars who are trying to paint a criminal as someone 'standing against' the deep state. TRUMP IS PART OF THE DEEP STATE, ONLY DUMMIES DO NOT GET IT. ..."
"... No matter the situation in Venezuela, whatever the US government and media are saying is just hostile propaganda as they couldn't give a rat's ass about the people living there. The Libyan people were doing well out of their oil, as were the Iraqis, living in reasonable wealth and security, and look at them now after the US decided to meddle in their affairs. Now after all that, even if something the US government says may be true, why believe it? How many times do you need to be fooled to stop being a fool? ..."
"... The nuttiest member of the Trump administration is UN Ambassador Nikki Haley. Her latest neo-nazi stunt was to join protestors last week calling for the overthrow of the democratically elected government of Venezuela. She grabbed a megaphone at a tiny New York rally and told the few "protesters" (organized by our CIA) to say the USA is working to overthrow their President. This was so bizarre that our corporate media refused to report it. ..."
"... Why does everyone make Trump out to be a victim, poor ol Trump, he's being screwed by all those people he himself appointed, poor ol persecuted Trump. Sounds like our Jewish friends with all the victimization BS. ..."
"... By now Trump must be near bat shit crazy. Imagine hundreds of vampires descending on every exposed artery and vein. Does he have a chance in 2020? Not with the people who are around him today ..."
"... Regardless of what the MSM reports, the population is fed-up with all the malarkey, and the same old faces. ..."
"... If he can he should issue an executive order allowing important items like immigration to go directly to public referendum, by passing congress. We're tired of idiots with personal grudges holding our President hostage. Stern times calls for sterner measures. ..."
"... Juan Guaidó is the product of a decade-long project overseen by Washington's elite regime change trainers. While posing as a champion of democracy, he has spent years at the forefront of a violent campaign of destabilization. ..."
Jan 28, 2019 | www.unz.com

Agent76 says: January 30, 2019 at 7:21 pm GMT 100 Words Jan 24, 2019 Catastrophic Consequences What's Really Happening in Venezuela

In this video, we give you the latest breaking news on the current situation in Venezuela with Maduro, the election, and Trump's response.

UN should be probing Washington and allies for regime-change crimes Identical condemnations from the US and allies and the synchronicity show that Venezuela is being targeted for regime change in a concerted plot led by Washington.

http://www.informationclearinghouse.info/50989.htm


AnonFromTN , says: January 30, 2019 at 7:58 pm GMT

@Sergey Krieger Negotiations are not necessarily a sign of weakness. However, Maduro should negotiate with the puppet masters, not with the puppet. I don't think that killing that pathetic Guaido is a good strategy: you don't want to make a martyr out of nonentity.
WorkingClass , says: January 30, 2019 at 8:02 pm GMT
And, in effect, I wish for the success of Juan Guaido in his struggle with Maduro, and I support American diplomatic and economic pressure on Maduro to step down. After all, Venezuela is in our back yard with huge oil reserves.

FUCK YOU! Venezuela is not "our" back yard. And the oil does not belong to "us".

anonymous [204] Disclaimer , says: January 30, 2019 at 8:31 pm GMT
[Donald Trump, for all that and for his various faults and miscues, is in reality the only thing standing in the way of the end of the old republic. ]

It is so disappointing that Americans yet to come to realization that this criminal Jewish Mafia does not standing at the end of the old republic. He is DEEPLY involved, but his STYLE is different. He kills and terrorize the same as Regan, Carter, Clinton, Bush, Obama who have killed millions of people. His sanction is the KILLING MACHINE to topple governments TO STEAL THEIR RESOURCES FOR THE DUMMIES. I have NO respect for the liars who are trying to paint a criminal as someone 'standing against' the deep state. TRUMP IS PART OF THE DEEP STATE, ONLY DUMMIES DO NOT GET IT.

The ignorant Jewish mafia 'president' IS MORE DANGEROUS because he like his 'advisors' is totally ILLITERATE. It is a family business dummies.

Are dummies going to hold petty people like Bolton who lie to get money from MEK to buy a new suit and new shoes, is responsible for the policy of the Trump regime where he wages WARS, economic sanction, to starve children to surrender? Then NO ONE Trusts you. MEK people are not more than 20, but are funded by the US colony, Saudi Arabia where MBS transfers money to the Jewish mafia family funding US wars.

Maduro has EVERY SINGLE RIGHT to arrest Juan Guiado, a gigolo who is taking orders from a US and an illiterate 'president', where its dark history known to every living creature on earth. US has massacred millions of people in all continents including Latin America.

Maduro has every single right to arrest him and put on trail and execute him as a traitor and an enemy of the state. How many years the people in Venezuela should suffer for the US 'regime change' and its crimes against humanity in Venezuela to STEAL ITS RESOURCES.

onebornfree , says: Website January 30, 2019 at 9:15 pm GMT
"So let me get this straight: The Russians brought America to its knees with a few facebook ads, but Uncle Sam's concerted and ongoing efforts to overthrow governments around the world and interfere with elections is perfectly fine? Because democracy? Riiiiiiight." :

https://www.corbettreport.com/election-interference-is-ok-when-uncle-sam-does-it-propagandawatch/

Regards, onebornfree

anonymous [204] Disclaimer , says: January 30, 2019 at 9:34 pm GMT
[The last Venezuelan Presidential election was a joke. ]

YOU ARE A JOKE ZIONIST IDIOT.

The Making of Juan Guaidó: How the US Regime Change Laboratory Created Venezuela's Coup Leader

[Juan Guaidó is the product of a decade-long project overseen by Washington's elite regime change trainers. While posing as a champion of democracy, he has spent years at the forefront of a violent campaign of destabilization.]

https://www.globalresearch.ca/the-making-of-juan-guaido-how-the-us-regime-change-laboratory-created-venezuelas-coup-leader/5666971

Illiterate Jewish Mafia 'president' must be kicked out of the office. Hands of Israel is all over the SELECTION.

The ignorant 'president' is MORE DANGEROUS THANT OTHER CRIMINAL US REGIMES because on top of being a criminal, he is ILLITERATE as well.

[In 2009, the Generation 2007 youth activists staged their most provocative demonstration yet, dropping their pants on public roads and aping the outrageous guerrilla theater tactics outlined by Gene Sharp in his regime change manuals.This far-right group "gathered funds from a variety of US government sources, which allowed it to gain notoriety quickly as the hardline wing of opposition street movements," according to academic George Ciccariello-Maher's book, "Building the Commune."

That year, Guaidó exposed himself to the public in another way, founding a political party to capture the anti-Chavez energy his Generation 2007 had cultivated.]

Guaido's behind towards washington criminal elite

map , says: January 30, 2019 at 9:36 pm GMT
@By-tor See, this is the typical lie. Socialism fails, so the socialist blames the outside wrecker for causing the problem. If Moscow freezes, then it is because of the wreckers. If Moscow starves, then it is because of the wreckers.

If Venezuela collapses, then it is because of "sanctions," not the failure of the new socialist economy.

America has the right to lock anyone out of its economy that it wants, for whatever reasons. This should not matter because that nation can still trade with the rest of the world, like China. Venezuela could get everything it wants by simply selling oil to China in exchange for goods. The problem is, there is not enough oil production to do so and other nations are reluctant to replace American investment for fear of losing their assets as well.

Think about how wrong-headed the Chavez policy has been. If the Venezuelans have problems with their local ruling class and want to get rid of them fine do so. But, why go after the American oil company? The Americans don't care who rules Venezuela as long as their contracts are honored. Chavez could have then been a true socialist an allocate a greater dividend to Venezuelans that was previously being hoarded by the ruling class an arrangement similar to what Alaskans have with American oil companies.

But no there was an immediate seizure of assets because the only purpose of socialism is to make the socialist leaders rich. And Chavez and Maduro became very rich indeed.

Hibernian , says: January 30, 2019 at 9:48 pm GMT
@WorkingClass No other nation is in our back yard. They are near neighbors.
Sergey Krieger , says: January 30, 2019 at 10:02 pm GMT
@AnonFromTN I would happily martyr gorbachov , Yeltsin and all their gang. I think everybody would have been far better of then. Same is applied to the puppet. Nikolai II was martyred and things got a lot better. What is important is winning and final outcome, while making some martyrs in the process.
RVBlake , says: January 30, 2019 at 10:11 pm GMT
@Harold Smith Trump's personnel picks are mind-boggling. I cannot see how he disapproves Eliot Abrams for deputy SoS with one breath, then blandly allows Pompeo to appoint him an envoy to a trouble-spot. Bolton, Pompeo, Goldberg et al.
El Dato , says: January 30, 2019 at 10:11 pm GMT
@Sean

NEOCON America does not want Russian bombers in South America.

Real America doesn't give a f*ck. Bombers are so last century, might as well put up machine-gun equipped Union Pacific Big Boys to make it marginally more steampunk and become a real danger for the USA.

EliteCommInc. , says: January 30, 2019 at 10:33 pm GMT
@Tyrion 2 There is not a single complaint here that did not exist before the election or before Pres Chavez.

There are poor management leaders all over the globe. That';s their business. Hey we have some right here in the US I take it your solution is a military coup or better yet a coup fostered by the EU or the OAS, or maybe ASEAN or SDG . . .

jack daniels , says: January 30, 2019 at 10:40 pm GMT
It would be nice if someone simply asked Trump why it is he originally wanted to get along with Russia and pull out of the middle east and generally opposed the "neoconservative" approach and now seems to be hiring neocons and doing what they want. Is he trying to placate Sheldon Adelson and Adelson's lackeys, or what? I don't know of his being asked about this directly.
APilgrim , says: January 30, 2019 at 10:49 pm GMT
Is President Nicolas Maduro stealing the strategic gold reserves of Venezuela?

'Venezuela Has 20 Tons of Gold Ready to Ship. Address Unknown', Patricia Laya and Andrew Rosati, Bloomberg, January 30, 2019, https://finance.yahoo.com/news/venezuela-20-tons-gold-ready-004013962.html

Venezuelan lawmaker Jose Guerra dropped a bombshell on Twitter Tuesday: The Russian Boeing 777 that had landed in Caracas the day before was there to spirit away 20 tons of gold from the vaults of the country's central bank. Guerra is a former central bank economist who remains in touch with old colleagues there. A person with direct knowledge of the matter told Bloomberg News Tuesday that 20 tons of gold have been set aside in the central bank for loading. Worth some $840 million, the gold represents about 20 percent of its holdings of the metal in Venezuela.

Commentator Mike , says: January 30, 2019 at 11:01 pm GMT
@map

No matter the situation in Venezuela, whatever the US government and media are saying is just hostile propaganda as they couldn't give a rat's ass about the people living there. The Libyan people were doing well out of their oil, as were the Iraqis, living in reasonable wealth and security, and look at them now after the US decided to meddle in their affairs. Now after all that, even if something the US government says may be true, why believe it? How many times do you need to be fooled to stop being a fool?

Tyrion 2 , says: January 30, 2019 at 11:02 pm GMT
@EliteCommInc.

No, Chavez had popular legitimacy. Maduro has nothing but force to keep himself in power now. Yes, there's easy definition for the above but Chavismo is decrepit.

Pressure for a reasonable Presidential election is based on that.

peterAUS , says: January 30, 2019 at 11:12 pm GMT
@RVBlake

A guy on ZH explained it well, I guess:

  1. The opposition hates me. I can do no right.
  2. The Trumptards blindly support me. I can do no wrong.
  3. There are not enough independent thinkers to make a difference as the two main sides bitterly fight each other over every minute, meaningless issue.
  4. I can pretty much do as I please without consequence ..like pay off all my buddies and pander to the jews/globalist/elites.
    I'd add: and by doing the last, I could cut a deal with the real TPTBs as to for what happens after I leave White House.
Hibernian , says: January 30, 2019 at 11:21 pm GMT
@Tyrion 2

Chavez had popular support . He felt the need to intimidate opponents from the beginning. Like Bill Bellicheck and Tom Brady feeling the need to cheat.

Pft , says: January 30, 2019 at 11:32 pm GMT
@APilgrim

Makes sense. They owe a big chunk of money to Russia and a payment of 100 million is coming due. Russia gets security for future payments while it holds their gold in a safe place. They may ship the rest to China if they are smart

renfro , says: January 30, 2019 at 11:41 pm GMT
@Carlton Meyer

The nuttiest member of the Trump administration is UN Ambassador Nikki Haley. Her latest neo-nazi stunt was to join protestors last week calling for the overthrow of the democratically elected government of Venezuela. She grabbed a megaphone at a tiny New York rally and told the few "protesters" (organized by our CIA) to say the USA is working to overthrow their President. This was so bizarre that our corporate media refused to report it.

She's being paid no doubt by the usual suspects. She is personally 1 million in debt and has signed with a Speakers agency to give speeches for 200,000 a pop.

COLUMBIA, S.C. (WCIV)

"Haley is currently quoting $200,000 and the use of a private jet for domestic speaking engagements, according to CNBC
In October 2018, when Haley resigned, she said, she would be taking a "step up" into the private sector after leaving the U.N. According to a public financial disclosure report based on 2017 data, at the rate quoted for her engagements, just a handful would pay down more than $1 million in outstanding debt that was accrued during her 14 years

renfro , says: January 30, 2019 at 11:43 pm GMT
@peterAUS

3. There are not enough independent thinkers to make a difference as the two main sides bitterly fight each other over every minute, meaningless issue.

Well that is true.

renfro , says: January 30, 2019 at 11:59 pm GMT
Well people you need to explore this move to take over Venezuela in the context of what having that oil control will mean for the US and Israel in the increasingly likely event we blow up Iran and up end the ME for Israel.

Despite Trump selling off half of our US oil reserves last year .. https://www.reuters.com/article/us-usa-oil-reserve/u-s-sells-11-million-barrels-of-oil-from-reserve-to-exxon-five-other-firms-idUSKCN1LG2WT ..the US doesn't currently, at present anyway, need to control Venezuela's oil .

So what could happen that might make control of oil rich Venezuela necessary? Why has Venezuela become a Bolton and Abrams project? Why is Netanyahu putting himself into the Venezuela crisis ?

We, otoh, would need all the oil we could get if we blew up the ME, specifically Iran, figuratively or literally. The US signed a MOU with Israel in 1973 obligating us to supply Israel with oil ( and ship it to them) if they couldn't secure any for themselves.

Z-man , says: January 31, 2019 at 12:11 am GMT
@Hibernian I hate those two guys so much, and the owner Kraft also. I'm hoping for a helmet to helmet collision for Brady early in the second quarter with his bell ringing for the rest of the game. (Evil grin)
Z-man , says: January 31, 2019 at 12:14 am GMT
@renfro I have nothing but ill will for that mutt Haley.
By-tor , says: January 31, 2019 at 12:41 am GMT
@Tyrion 2 Yes, the int'l monitors said the elections were fair as Maduro received over 60% of the vote. You think the 'deplorables' of venezuela elected the known US-Wall Street neo-liberal puppet Guaido? No, the US Tape Worm groomed this twerp, all-the-while his backers and paymasters in the American neo-Liberal ruling class claim Russian meddling in the 2016 US elections. The shamelessness and hypocrisy is astounding.
EliteCommInc. , says: January 31, 2019 at 12:47 am GMT
@Tyrion 2 Pres Hugo Chavez's admin was very controversial. And the conditions you speak of have plagued Venezuela even before Pres Chavez came to government.

This really is none of our affair. We don't have a mandate to go about the planet tossing out whoever we think is crazy. He is not a threat to the US. There's no indication that he intends to harm US businesses.

Their polity means their polity. You'll have to do better than he's crazy, mean, a despot, etc. That's for them to resolve.

Johnny Walker Read , says: January 31, 2019 at 12:50 am GMT
@Commentator Mike Seems some will never learn the definition of insanity, especially the NeoCons who have been running America for far too long. I recommend John Perkins "Confessions of an Economic Hit Man" for the less informed among us here today. Maybe at some point they will get a clue.
redmudhooch , says: January 31, 2019 at 1:30 am GMT

I heartily dislike and find despicable the socialist government of Maduro, just as I did Hugo Chavez when he was in power. I have some good friends there, one of whom was a student of mine when I taught in Argentina many years ago, and he and his family resolutely oppose Maduro. Those socialist leaders in Caracas are tin-pot dictator wannabees who have wrecked the economy of that once wealthy country; and they have ridden roughshod over the constitutional rights of the citizens. My hope has been that the people of Venezuela, perhaps supported by elements in the army, would take action to rid the country of those tyrants.

Hard to take this guy seriously when he spouts Fox News level propaganda.

Why does everyone make Trump out to be a victim, poor ol Trump, he's being screwed by all those people he himself appointed, poor ol persecuted Trump. Sounds like our Jewish friends with all the victimization BS.

Its clear that voting no longer works folks, this is an undemocratic and illegitimate "government" we have here. We let them get away with killing JFK, RFK, MLK, Vietnam, we let them get away with 9/11, Iraq, Libya, Afghanistan, Syria. They've made a mess in Africa. All the refugees into Europe, all the refugees from Latin America that have already come from CIA crimes, more will come.
We wouldn't need a wall if Wall St would stop with their BS down there!

You can't just blame Jews, yes there are lots of Jews in Corporate America, bu t not all of them are, and there are lots of Jews who speak out against this. We were doing this long before Israel came into existence. You can't just blame everything one one group, I think Israel/Zionist are responsible for a lot of BS, but you can't exclude CIA, Wall St, Corporations, Banks, The MIC either. Its not just one group, its all of them. They're all evil, they're imperialists and they're all capitalists. I think Israel is just a capitalist creation, nothing to do with Jews, just a foothold in he middle east for Wall St to have a base to control the oil and gas there, they didn't create Israel until they dicovered how much oil was there, and realized how much control over the world it would give them to control it. Those people moving to Israel are being played, just like the "Christian Zionists" here are, its a cult. Most "Jews" are atheists anyhow, and it seems any ol greedy white guy can claim to be a Jew. So how do you solve a "Jewish Problem" if anybody can claim to be a Jew? I think solving the capitalist problem would be a little easier to enforce.

All of the shills can scream about communists, socialists and marxists all they want. Capitalism is the problem always has been always will be. Its a murderous, immoral, unsustainable system that encourages greed, it is a system who's driving force is maximizing profits, and as such the State controlled or aligned with Corporations is the most advanced form of capitalism because it is the most profitable. They're raping the shit out of us, taking our money to fund their wars, so they can make more money while paying little to no taxes at all. Everything, everyone here complains about is caused by CAPITALISM, but nobody dares say it, they've been programmed since birth to think that way.

We should nationalize our oil and gas, instead of letting foreigners come in and steal it, again paying little or no taxes on it, then selling the oil they took from our country back to us. Russia and Venezuela do it, Libya did it, Iraq did it, and they used the money for the people of the country, they didn't let the capitalists plunder their wealth like the traitors running our country. We're AT LEAST $21 trillion in the hole now from this wonderful system of ours, don't you think we should try something else? Duh!

It is the love of money, the same thing the Bible warned us about. Imperialism/globalism is the latest stage of capitalism, that is what all of this is about, follow the money. Just muh opinion

Regime Change and Capitalism
https://dissidentvoice.org/2018/07/regime-change-and-capitalism/

bluedog , says: January 31, 2019 at 1:36 am GMT
@Tyrion 2 From the people fool not by the C.I.A. declaring that well we like the other fellow best for president,after all using the logic you fail to have Hillary could have said call me madam president and leave the orange clown out in the dark,stupid,stupid people
RobinG , says: January 31, 2019 at 2:10 am GMT
@anonymous

"And, in effect, I wish for the success of Juan Guaido in his struggle with Maduro, and I support American diplomatic and economic pressure on Maduro to step down. After all, Venezuela is in our back yard with huge oil reserves."

OMG, Cathey really said that. Is he always such a shit? He certainly has Venezuela completely wrong.

The Making of Juan Guaidó: How the US Regime Change Laboratory Created Venezuela's Coup Leader https://grayzoneproject.com/2019/01/29/the-making-of-juan-guaido-how-the-us-regime-change-laboratory-created-venezuelas-coup-leader/

Larry Wilkerson on the special meeting of the Security Council

Many Countries at UN Oppose Trump Interference in Venezuela

Sergey Krieger , says: January 31, 2019 at 2:15 am GMT
@AnonFromTN This phylosophical questions should not led to no actions. Modern Russia is actually in much better position now than it was in 1913. True. There is never final. Sorry for wrong words choice. Dialectics.
RobinG , says: January 31, 2019 at 2:20 am GMT
@AnonFromTN Tyrion and Sean are both sicko Zio-trolls.
Asagirian , says: January 31, 2019 at 2:25 am GMT
Why not just install the Deep State as president for life? It'd be more honest.
EliteCommInc. , says: January 31, 2019 at 2:38 am GMT
@Wizard of Oz The scenario you describe is an accurate. And requires me to make judgments about a dynamic I am unfamiliar with -- no bite. Several sides to this tale and I have heard and seen it before.

I may however make a call.

In 2017 2/3 of the states in the region chose not to interfere. They have not changed their minds on intervention.

ohh by the way I did ask and here's the familial response:

https://brewminate.com/venezuelans-want-maduro-out-but-oppose-military-intervention-to-remove-him/

EliteCommInc. , says: January 31, 2019 at 2:47 am GMT
@Wizard of Oz https://www.thequint.com/news/world/venezuelans-want-prez-maduro-out-but-oppose-foreign-intervention

https://grayzoneproject.com/2019/01/29/venezuelans-oppose-intervention-us-sanctions-poll/

https://www.thecanary.co/global/world-news/2019/01/29/new-poll-shows-venezuelans-overwhelmingly-oppose-military-intervention-and-us-sanctions/

Just to be fair:

https://www.newsmax.com/newsfront/venezuelans-multinational-intervention-president-nicolas-maduro-economic-situation/2018/09/17/id/882143/

But reading the data sets makes it clear that what they want is some humanitarian relief. B y and large I have the family telling me to mind my own business, but they would like a meal, some medicine and some water.

Asking helps figuring out what to do.

the grand wazoo , says: January 31, 2019 at 2:59 am GMT
By now Trump must be near bat shit crazy. Imagine hundreds of vampires descending on every exposed artery and vein. Does he have a chance in 2020? Not with the people who are around him today.

Regardless of what the MSM reports, the population is fed-up with all the malarkey, and the same old faces.

In Trump's remaining 2 years he must throw off the parasites, bring in real men, and go to work on infrastructure, health care, and real jobs. He has to out the naysayers, the creeps and the war mongers. Throw Bolton from the train, and divorce Netanyahu and Israel. Appeal directly to the public.

If he can he should issue an executive order allowing important items like immigration to go directly to public referendum, by passing congress. We're tired of idiots with personal grudges holding our President hostage. Stern times calls for sterner measures.

AnonFromTN , says: January 31, 2019 at 3:08 am GMT
@RobinG That would be an easy, almost optimistic explanation: some people are venal enough to say or write anything for money. Pessimistic explanation is that some people who can read and write are nonetheless dumb or brainwashed enough to sincerely believe the BS they are writing.
Anonymous [362] Disclaimer , says: January 31, 2019 at 4:19 am GMT
@therevolutionwas

Can you define what capitalism is ? Once that idea is refined, finessed, and compared to multiple color changes of capitalism, it becomes easier who to fit in the plastic infinitely expandable box of ideas of capitalism starting with the chartered company to patient laws to companies making military hardwares paid by tax payers to tax cut by government to seizure of foreign asset by US-UK to protection of the US business by military forces to selling military gadgets to the countries owned by families like Saudi royals Gulf monarchs and to the African ( American installed ) dictators to printing money .

tac , says: January 31, 2019 at 4:58 am GMT
A great article I posted in another thread few days ago dives deep into who Juan Guaido is and his past grooming for the past 10+ years:

Juan Guaidó is the product of a decade-long project overseen by Washington's elite regime change trainers. While posing as a champion of democracy, he has spent years at the forefront of a violent campaign of destabilization.

https://grayzoneproject.com/2019/01/29/the-making-of-juan-guaido-how-the-us-regime-change-laboratory-created-venezuelas-coup-leader/

Here is another:

A great documentary on the 2002 coup d'etat of Chavez: The Revolution Will Not Be Televised, Chavez, The 2002 Coup

[Jan 31, 2019] Supposedly trump is been wanting to attack Venezuela for a while

Jan 31, 2019 | www.unz.com

Harold Smith , says: January 30, 2019 at 5:43 pm GMT

@AnonFromTN

"Whoever believed that Trump will drain the swamp must feel disappointed."

The thing is, Trump just didn't fail to drain the swamp, he "took the ball and ran with it." Apparently he's an enthusiastic imperialist who gets off on the illegitimate use of military force. (His attack on the Shayrat airbase in Syria should end any debate about that).

Supposedly he's been wanting to attack Venezuela for a while:

https://www.theguardian.com/us-news/2018/jul/04/trump-suggested-invading-venezuela-report

Most recently, even Lindsey Graham (of all people) had to talk Trump out of invading Venezuela:

https://www.msn.com/en-xl/latinamerica/top-stories/graham-trump-considered-military-action-in-venezuela/ar-BBSQx31

I can understand Trump's die-hard supporters' argument that Trump is being coerced into doing evil things (although I don't agree with it), but how can they explain Trump's apparent enthusiasm?

The only explanation that makes sense to me is that Trump's anti-war/anti-interventionist tweets from 2013 were insincere and his whole presidential campaign was a brazen fraud.

Edit: I just saw your comment #71; so you apparently see it the same way I do.

Tyrion 2 , says: January 30, 2019 at 5:44 pm GMT
@By-tor Maduro is just Venezuelan Mugabe. Has it really come to this? That people on Unz will support any random lunatic as long as he mouths off about America or Israel every now and again?

Oh, but the sanctions! Proper economic sanctions were only very recently applied. The Venezuelan economy was already utterly wrecked by their joke of a government.

Liken the US not trading with Venezuela to a medieval siege if you like, but I suggest you read up on medieval sieges first. Hint: they weren't merely a government run boycott.

Herald , says: January 30, 2019 at 5:45 pm GMT
@follyofwar The Empire has been overreaching for years and it's now well past time it had its grimy grabbing hands chopped off.
Jotham Tiarks , says: January 30, 2019 at 5:47 pm GMT
@anonymous I fully agree with everything you said I was about to post a comment and then saw yours saying exactly what i was wanting to say!
Ilyana_Rozumova , says: January 30, 2019 at 6:06 pm GMT
@DieselChadron OMG (Oh my God) Globalists Made a mistake.
onebornfree , says: Website January 30, 2019 at 6:07 pm GMT
@onebornfree Some all to rare common sense – a writer who understands that both big government Trump and the big government "opposition" to Trump are not, never were , and never will be, "the answer":

"The Real Problem Is The Politicization Of Everything"

" While on the market and in radically decentralized systems, disagreements and polarization are not a problem, centralized political decision-making has in its nature that only one view can prevail. Suddenly, who is in the White House or whether regulation X or Y is passed does matter a great deal, and those with a different opinion than you on it may seem like actual enemies. Within voluntary settings, one can live with people that one disagrees with. All parties curate a way of life that works while living in peace with others.

To regain civility in human interactions and finally treat other human beings as human beings again, we would do well to get politics out of human affairs."

https://www.zerohedge.com/news/2019-01-30/real-problem-politicization-everything

Very well said.

Regards,onebornfree

Ilyana_Rozumova , says: January 30, 2019 at 6:11 pm GMT
@AnonFromTN Or four the fracking was only Fata Morgana,
Carlton Meyer , says: Website January 30, 2019 at 6:13 pm GMT
For those who think this coup attempt was sudden, here is something from my blog:

Oct 9, 2018 – Ambassador Supports Coup

Few Americans know that our nation imposed harsh economic sanctions on Venezuela because the Neocons want to overthrow its democratic government. They hate that oil rich Venezuela insists on controlling its oil production rather than allowing big American corporations to run things. Almost three years ago, Neocon puppet Barack Obama declared a national emergency to impose sanctions by designating Venezuela an "unusual and extraordinary threat" to national security, and Trump continued sanctions.

The nuttiest member of the Trump administration is UN Ambassador Nikki Haley. Her latest neo-nazi stunt was to join protestors last week calling for the overthrow of the democratically elected government of Venezuela. She grabbed a megaphone at a tiny New York rally and told the few "protesters" (organized by our CIA) to say the USA is working to overthrow their President. This was so bizarre that our corporate media refused to report it. Jimmy Dore assembled this great video of CNN presenting their expert calling the President of Venezuela paranoid for saying the USA wants to overthrow his government. A few hours later, a different CNN report documented recent efforts by the USA to overthrow his government!

AnonFromTN , says: January 30, 2019 at 6:16 pm GMT
@Tyrion 2 This is not about Maduro, or Guaido, who is likely an even bigger shit, as he clearly serves foreign masters. Don't you think it should be up to the people of Venezuela to change their president? The US meddling is against every rule of behavior of countries towards other countries. How would you feel if Burkina Faso told you who should be the president of the US? That's exactly how every Venezuelan who has dignity feels, regardless of their opinion of Maduro and his coterie.
bluedog , says: January 30, 2019 at 6:31 pm GMT
@Mr McKenna What did you expect,before the oath was out of his mouth he was busy cutting taxes for the 1%,for Trump is the swamp .
By-tor , says: January 30, 2019 at 6:35 pm GMT
@Tyrion 2 The US has been plotting against Venezuela since the last Wall Street puppet Pres. Rafael Caldera was defeated by Chavez and ownership of oil assets returned to Venezuela thereby cutting out anf angering the NYC-London predatory globalist cabal. Trump's hitmen are now preventing the Venezuelan state from accessing credit and from withdrawing its own money and gold foolishly deposited in US and London banks. The Venezuelan corporate elite act against the general population. You do not fully understand the situation.
peterAUS , says: January 30, 2019 at 6:37 pm GMT
@Johnny Rottenborough

Ethnonationalist stuff is ridiculous, it's stupid on the face of it, it's ridiculous, I've said it from day one. Ethnonationalism is a dead end, it's for losers. Economic nationalism and civic nationalism bind you together as citizens, regardless of your race, regardless of your ethnicity, regardless of your religion

Interesting.

Ah, well .maybe some other time.
If ever.

Johnny Rottenborough , says: Website January 30, 2019 at 6:38 pm GMT
@Digital Samizdat Digital Samizdat -- As civic nationalism is no kind of nationalism and presents no obstacle to race replacement, I imagine Jewry will be happy with it. Jewry will also be happy that Bannon the race realist ('It's been almost a Camp of the Saints-type invasion into Central and then Western and Northern Europe') has been successfully neutered.

[Jan 31, 2019] Venezuela, the Deep State, and Subversion of the Trump Presidency by Boyd D. Cathey

Notable quotes:
"... In February 2017, it was reported that Abrams was Secretary of State Rex Tillerson 's first pick for Deputy Secretary of State , but that Tillerson was subsequently overruled by Trump. Trump aides were supportive of Abrams , but Trump opposed him because of Abrams' opposition during the campaign. ..."
"... On January 25, 2019, Secretary of State Mike Pompeo appointed Abrams as the United States' Special Envoy to Venezuela ." ..."
"... diplomatic and economic ..."
Jan 31, 2019 | www.unz.com

There he was, right there on the stage to the right side of Secretary of State Mike Pompeo who was briefing the press on America's position concerning the recent coup in Venezuela. I rubbed my eyes -- was I seeing what I thought I was seeing?

It was Elliot Abrams. What was HE doing there? After all, back in February 2017, after then-Secretary of State Rex Tillerson had pushed for his nomination as Deputy Secretary of State, it was President Trump himself who had vetoed his appointment.

Here is how the anodyne account in Wikipedia describes it:

In February 2017, it was reported that Abrams was Secretary of State Rex Tillerson 's first pick for Deputy Secretary of State , but that Tillerson was subsequently overruled by Trump. Trump aides were supportive of Abrams , but Trump opposed him because of Abrams' opposition during the campaign. [emphasis mine]

Abrams during the 2016 campaign had been a NeverTrumper who vigorously opposed Donald Trump and who had strongly attacked the future president's "Make America Great Again," America First foreign policy proposals.

Abrams, a zealous Neoconservative and ardent globalist was -- and is -- one of those foreign policy "experts" who has never seen a conflict in a faraway country, in a desert or jungle, where he did not want to insert American troops, especially if such an intervention would support Israeli policy. He was deeply enmeshed in earlier American interventionist miscues and blunders in the Middle East, even incurring charges of malfeasance.

Apparently, President Trump either did not know that or perhaps did not remember Abrams's activities or stout opposition. In any case, back in 2017 it took an intervention by a well-placed friend with Washington connections who provided that information directly to Laura Ingraham who then, in turn, placed it on the president's desk And Abrams' selection was effectively stopped, torpedoed by Donald Trump.

But here now was Abrams on stage with the Secretary of State.

What was that all about?

Again, I went to Wikipedia, and once again, I quote from that source: " On January 25, 2019, Secretary of State Mike Pompeo appointed Abrams as the United States' Special Envoy to Venezuela ."

Despite President Trump's resolute veto back in February 2017, Abrams was back, this time as a Special Envoy, right smack in the department that President Trump had forbade him to serve in. Did the president know? Had he signed off on this specially-created appointment? After all, the very title "Special Envoy on Venezuela" seems something dreamed up bureaucratically by the policy wonks at State, or maybe by Mike Pompeo.

Then there was the widely reported news, accompanied by a convenient camera shot of National Security Adviser John Bolton's note pad (which may or may not have been engineered by him), with the scribble: "5,000 troops to Colombia."

What gives here?

Last week suddenly there was a coup d'etat in Venezuela, with the head of the national assembly, Juan Guiado, proclaiming himself as the country's new and rightful president, and the theoretical deposition of then-current President Nicolas Maduro. And we were told that this action was totally "spontaneous" and an "act of the Venezuelan people for democracy," and that the United States had had nothing to do with it.

If you believe that, I have an oil well in my backyard that I am quite willing to sell to you for a few million, or maybe a bit less.

Of course, the United States and our overseas intelligence services were involved.

Let me clarify: like most observers who have kept up with the situation in oil-rich Venezuela, I heartily dislike and find despicable the socialist government of Maduro, just as I did Hugo Chavez when he was in power. I have some good friends there, one of whom was a student of mine when I taught in Argentina many years ago, and he and his family resolutely oppose Maduro. Those socialist leaders in Caracas are tin-pot dictator wannabees who have wrecked the economy of that once wealthy country; and they have ridden roughshod over the constitutional rights of the citizens. My hope has been that the people of Venezuela, perhaps supported by elements in the army, would take action to rid the country of those tyrants.

And, in effect, I wish for the success of Juan Guaido in his struggle with Maduro, and I support American diplomatic and economic pressure on Maduro to step down. After all, Venezuela is in our back yard with huge oil reserves.

But potentially sending American troops -- as many as 5,000 -- to fight in a country which is made up largely of jungle and impassible mountains, appears just one more instance, one more example, of the xenophobic internationalism of men like Bolton and the now state department official, Abrams, who believe American boots on the ground is the answer to every international situation. Experience over the past four decades should indicate the obvious folly of such policies for all but the historically blind and ideologically corrupt.

While we complain that the Russians and Chinese have propped up the Maduro government and invested deeply in Venezuela, a country within our "sphere of influence" in the Western Hemisphere (per the "Monroe Doctrine") -- we have done the very same thing, even more egregiously in regions like Ukraine that were integrally part of historical Russia, and in Crimea, which was never really part of Ukraine (only for about half a century) but historically and ethnically Russian. Did we not solemnly pledge to Mikhail Gorbachev, under George H. W. Bush, that if the old Soviet Union would dissolve and let its some fourteen socialist "republics" go their own way, leave the Russian Federation, that we, in turn, would not advance NATO up to the borders of Russia? And then we did the exact opposite almost immediately go back on our word and move our troops and advisers right up to the borders of post-1991 Russia?

From mid-2015 on I was a strong supporter of Donald Trump, and, in many ways, I still am. In effect, he may be the only thing that stands in the way of a total and complete recouping of power by the Deep State, the only slight glimmer of light -- that immovable force who stands up at times to the power-elites and who has perhaps given us a few years of respite as the managerial class zealously attempts to repair the breach he -- and we -- inflicted on it in 2016.

My major complaint, what I have seen as a kind of Achilles' Heel in the Trump presidency, has always been in personnel, those whom the president has surrounded himself with. And my criticism is measured and prudential, in the sense that I also understand what happens -- and what did happen -- when a billionaire businessman, a kind of bull-in-the-china shop (exactly what was needed), comes to Washington and lacks experience with the utterly amoral and oleaginous and obsequious political class that has dominated and continues to dominate our government, both Democrats and, most certainly, Republicans.

The wife of a very dear friend of thirty-five years served in a fairly high post during the Reagan administration. Before her untimely death a few years ago, she recounted to me in stark detail how the minions and acolytes of George H. W. Bush managed to surround President Reagan and subvert large portions of the stated Reagan Agenda. Reagan put his vice-president effectively in charge of White House personnel: and, as they say, that was it, the Reagan Revolution was essentially over.

In 2016 a number of friends and I created something called "Scholars for Trump." Composed mostly of academics, research professors, and accomplished professionals, and headed by Dr. Walter Block, Professor of Economics at Loyola-New Orleans, and Dr. Paul Gottfried, Raffensperger Professor of Humanities at Elizabethtown College, in Pennsylvania, we attempted to gather real professed believers in the stated Trump agenda. We received scant mention (mostly negative) in the so-called "conservative" press, who proceeded to smear us as "ultra-right wingers" and "paleo-conservatives." And, suddenly, there appeared another pro-Trump list, and that one composed largely of the same kinds of professionals, but many if not most of whom had not supported Donald Trump and his agenda during the primary campaigns.

What was certain was that many of the amoral time-servers and power elitists had decided that it was time for them to attach themselves to Trump, time for them to insinuate themselves into positions of power once again, no matter their distaste and scorn for that brash billionaire upstart from New York.

Remember the (in)famous interview that the President-elect had with Mitt Romney who desperately wanted to be Secretary of State? Recall the others also interviewed -- some of whom we remembered as Donald Trump's opponents in the campaign -- who came hat-in-hand to Trump Tower looking for lucrative positions and the opportunity once again to populate an administration and direct policy? And, yes, work from within to counteract the stated Trump agenda?

It would be too facile to blame the president completely: after all, the professional policy wonks, the touted experts in those along-the-Potomac institutes and foundations, were there already in place. And, indeed, there was a need politically, as best as possible, to bring together the GOP if anything were to get through Congress. (As we have seen, under Paul Ryan practically none of the Trump Agenda was enacted, and Ryan at every moment pushed open borders.)

Our contacts did try; we did have a few associates close to the president. A few -- but only a few -- of our real Trump Agenda supporters managed to climb aboard. But in the long run we were no match for the machinations of the power elites and GOP establishment. And we discovered that the president's major strength -- not being a Washington Insider -- was also his major weakness, and that everything depended on his instincts, and that somehow if the discredited globalists and power-hungry Neoconservatives (who did not give Trump the time of day before his election) were to go too far, maybe, hopefully, he would react.

And he has, on occasion done just that, as perhaps in the case of Syria, and maybe even in Afghanistan, and in a few other situations. But each time he has had to pass the gauntlet of "advisers" whom he has allowed to be in place who vigorously argue against (and undercut) the policies they are supposed to implement.

Donald Trump, for all that and for his various faults and miscues, is in reality the only thing standing in the way of the end of the old republic. The fact that he is so violently and unreservedly hated by the elites, by the media, by academia, and by Hollywood must tell us something. In effect, however, it not just the president they hate, not even his rough-edged personality -- it is what he represents, that in 2016 he opened a crack, albeit small, into a world of Deep State putrefaction, a window into sheer Evil, and the resulting falling away of the mask of those "body snatchers" who had for so long exuded confidence that their subversion and control was inevitable and just round the corner.

President Trump will never be forgiven for that. And, so, as much as I become frustrated with some of the self-inflicted wounds, some of the actions which appear at times to go flagrantly against his agenda, as much as I become heartsick when I see the faces of Elliot Abrams -- and Mitt Romney -- in positions where they can continue their chipping away at that agenda, despite all that, I continue to pray that his better instincts will reign and that he will look beyond such men, and just maybe learn that what you see first in Washington is usually not what you'll get.


Taras77 , says: January 29, 2019 at 10:02 pm GMT

Abrams did it for me!

I cannot imagine a more evil person to be allowed back into govt than this man, who is more evil than he looks.

It is over, in my mind, with the trump admin; nothing has been done about the long list of crimes committed by the obama gang during the election and after. Nothing has been done about seth rich, I would add michael hastings, and the long list of clinton "suicides" and the clinton crimes. the list is endless with no progress.

The dimos in doj, fbi, etc have completely out-manuevered trump and he really has no junk yard dog to protect him-guliani is a joke, even if he is sober as he claims to be.

Big sigh, depressing.

anonymous [340] Disclaimer , says: January 30, 2019 at 12:24 am GMT
Scholars? For Trump? Still?

Linh Dinh on this website (June 12, 2016) predicted both the election outcome and its meaninglessness. He had by then, of course, been blackballed by Scholars, Inc., and is now helping to run a recycling operation back in Vietnam. But he has emerged as one of the top Unz columnists, most of his Heritage American attackers who couldn't see past their DNA having slunk away.

Conversely, go read the comment thread under Mr. Buchanan's latest. People who used to fall for the "we/us/our" conflation of their country and Uncle Sam are waking up, due largely to the President in whom you still place your scholarly hope. We may not be scholars, but we understand that the blood of people in places like Iraq, Libya, Syria, and soon enough Venezuela is on the hands of those who endorse the warmongering imperialism of Exceptionalia. Your scholarly enabling, such as:

"And, in effect, I wish for the success of Juan Guaido in his struggle with Maduro, and I support American diplomatic and economic pressure on Maduro to step down. After all, Venezuela is in our back yard with huge oil reserves."

is naive at best. As a scholar, did you support the "economic pressure" rationalized by Secretary of State Albright that killed hundreds of thousands of Iraqis, many of them children?

Those of you who still expect the Unz readership to give two sh ** s about Donald Trump or anyone else in the Washington Puppet Show are fast losing your relevance around here.

Ma Laoshi , says: January 30, 2019 at 1:09 am GMT
Yup, Personnel is Policy; always has been. The scale of it all really precludes the kind of benefit-of-the-doubt explanation the author struggles to formulate. It's not that Trump tried to do the right thing but some war-hawks, jews, and Wall-Street shysters got through regardless. Those were the only people that needed apply because Trump wasn't considering anybody else. One simply has to conclude that the people that currently surround him are indeed "his kind of people". And let's not forget that after a crash course in the realities of government he replaced Tillerson and notorious torturer McMaster because they were not hawkish, not pro-Israel, enough .

What evidence is there that your definition of "doing the right thing" coincides with Trump's anyway. Yes he made some non-interventionist noises during the campaign, but that was mostly during the primary before he'd kissed Adelson's ring in exchange for the shekels. But he was also "a very militaristic guy" who was all for "taking the oil" and who nonstop hated on Iran. Face it, it was just the Obama playbook: throw an incoherent mishmash to the proles in the hope that they remember only those parts they liked.

Isn't Trump's CV rather more illuminating on who he is than his campaign rhetoric: casino operator and pro-wrestling MC. He gets off on playing the rubes.

peterAUS , says: January 30, 2019 at 1:31 am GMT
Excellent, and timely article.

From mid-2015 on I was a strong supporter of Donald Trump, and, in many ways, I still am. In effect, he may be the only thing that stands in the way of a total and complete recouping of power by the Deep State

Donald Trump, for all that and for his various faults and miscues, is in reality the only thing standing in the way of the end of the old republic.

.despite all that, I continue to pray that his better instincts will reign and that he will look beyond such men, and just maybe learn that what you see first in Washington is usually not what you'll get.

Scholar, a? Man, you ..Anyway.

Impressive.

Carlton Meyer , says: Website January 30, 2019 at 5:43 am GMT
The US military has kept some 3000 soldiers in Columbia for years. Maybe that has grown to 5000, but Bolton's yellow pad note was a simple trick to fool simpletons. Invading Venezuela would require at least 50,000 US troops.

Americans are quick to denounce socialists, especially those in the US military who thrive in a socialist US military. Most Americans do not realize that their police, firefighters, schools, most universities, roads, water, and electricity are products of socialism. If you have an emergency in the USA, you dial 9-11 for socialists to help you. Everyone thinks that is great!

From my blog:

Jan 27, 2019 – A Clumsy Slow Coup

Corporate America media has not reported basic facts about the attempted takeover of Venezuela. The Deep State has tried to overthrow the popular, elected government of Venezuela for a decade as it gradually nationalized its oil production. Several coup attempts failed so the USA imposed sanctions to punish the people for voting wrong. Sanctions caused shortages and inflation but the elected government remains in power.

In the past, the USA conducted coups by bribing Generals to conduct a quick military takeover, and always denied participation. The Trump administration gave up on deception and began a clumsy, slow coup. I suspect Trump's new CIA appointed attorney general told Trump that he had the power to appoint foreign presidents, so last week he openly appointed a new president for Venezuela. The Venezuelan army openly backs the existing president so nothing changed. The UN did not recognize Trump's puppet president nor did any other major world power. These facts do not appear in our corporate media, although the internet provides reality via a Paul Craig Roberts article. (posted at unz.com)

Trump has now ordered other nations to send payments for oil purchases to a bank account controlled by his new president. This infuriates foreign governments because they know oil shipments will stop if they fail to pay the legitimate government of Venezuela, and oil prices will rise worldwide as they scramble to buy oil elsewhere. Meanwhile, a massive humanitarian and refugee crisis is building as the result of this economic embargo.

Ilyana_Rozumova , says: January 30, 2019 at 6:09 am GMT
I do not know how the fracking is going in the winter. I have read somewhere, that yields from fracking are going down. also that fracking companies are moving down to Texas.Also I do not know the state of strategic reserves, But I definitely suspect that moves in Venezuela were planed long before. so I have to presume that this is all about price of oil.
Trump quite a while ago, quite eagerly said something about moving on Venezuela.
Trump can be easily triggered by any economic subject by which US gains. But I do suspect that in this case it could be economic necessity. (What would be a real shame.)
follyofwar , says: January 30, 2019 at 4:04 pm GMT
@Taras77 I agree Taras. Although I much enjoyed reading Boyd Cathey's essay, sadly, I think he remains too optimistic. With the D's back in charge of the House, and the R's impotent in the Senate, (McConnell as majority leader is a joke), Trump's stated agenda is all over. He got nothing in his first two years besides the traditional GOP tax cut for the rich. And he waited far too long to get serious about the wall. Yes, Koch-man Paul Ryan opposed it, but surely Trump could have tried harder to get enough R votes to override him. His only option now, unless Pelosi budges a little, would be to declare a National Emergency on Feb 15. There is no way he could shut down the government again. Let's see how that goes.

However I disagree with Realist's comment. With Trump being attacked viciously on all sides, I don't understand how anyone could think he is part of the Deep State. I think Victor Davis Hanson got it right when he called Trump a "Tragic Hero."

AnonFromTN , says: January 30, 2019 at 4:20 pm GMT
Whoever believed that Trump will drain the swamp must feel disappointed. The US foreign policy is run by the swamp now, like it always was. The US uses full range of classical gangster tactics against Venezuela: blackmail, theft of assets, threats, etc. The US tries to instigate yet another "color revolution" to bring yet another puppet to power in yet another country. The only difference is, Maduro resists. But that's the difference in the victim country, not in DC.

[Jan 31, 2019] Venezuella and the price of oil

Jan 31, 2019 | www.unz.com

Ilyana_Rozumova , says: January 30, 2019 at 6:09 am GMT

I do not know how the fracking is going in the winter. I have read somewhere, that yields from fracking are going down. also that fracking companies are moving down to Texas.Also I do not know the state of strategic reserves, But I definitely suspect that moves in Venezuela were planed long before. so I have to presume that this is all about price of oil.
Trump quite a while ago, quite eagerly said something about moving on Venezuela.
Trump can be easily triggered by any economic subject by which US gains. But I do suspect that in this case it could be economic necessity. (What would be a real shame.)
Alfred , says: January 30, 2019 at 9:14 am GMT
@Ilyana_Rozumova It is not clear whether you are saying that Trump is trying to raise or lower oil prices.

If he wants to lower oil prices then why is he making it difficult for Iran to sell its oil?

If he wants to raise oil prices then why does he want the big US oil companies in Venezuela to sort out that country's oil business and raise exports?

I suspect he, and those around him, have no idea what they want to achieve. They are simply trying to demonstrate their "power" and ability to change regimes. To give the Monroe Doctrine a bit of oxygen. To scare the European vassals.

Realist , says: January 30, 2019 at 10:39 am GMT

Venezuela, the Deep State, and Subversion of the Trump Presidency

You're being rolled. Trump is part of the Deep State. Otherwise explain Bolton, Pompeo, Abrams and all the other dickheads Trump has hired.

Realist , says: January 30, 2019 at 10:44 am GMT
@Taras77 Correct, Trump is a member of the Deep State. Trump's election and big talk is a charade. It is hard to believe anyone would not see Trump as a chimera after all his bullshit.
Realist , says: January 30, 2019 at 10:53 am GMT

After all, Venezuela is in our back yard with huge oil reserves.

There it is .the reason the US is involved in Venezuelain politics .we want their oil.

renfro , says: January 30, 2019 at 7:29 am GMT
@Ilyana_Rozumova

Also I do not know the state of strategic reserves, But I definitely suspect that moves in Venezuela were planed long before

Trump is doing the same thing he did in his businesses ..using 'other people's money.assests' to cover his ass.
Now picture this ..sanctions on Iran, sanctions on Russia, sanctions on Venezuela + rising US interest rates + a slowing economy + half of US oil reserves sold to cover government spending.
Hope people get use to riding a bike when this perfect storm hits.

WH Proposes Selling Half the U.S. Strategic Oil Reserve
https://www.thedailybeast.com/trump-proposes-selling-half-the-us-strategic-oil-reserve
President Trump's proposal to slim down the national debt includes a plan to sell off about half of America's emergency oil stockpile -- made up of 687.7 million

And sold

U.S. sells 11 million barrels of oil from reserve to Exxon, five other firmshttps://www.reuters.com/article/us-usa-oil-reserve/u-s-sells-11-million-barrels-of-oil-from-reserve-to-exxon-five-other-firms-idUSKCN1LG2WT
WASHINGTON (Reuters) – Six companies, including ExxonMobil Corp, bought a total of 11 million barrels of oil from the U.S. Strategic Petroleum Reserve, a Department of Energy document showed on Friday, in a sale timed to take place ahead of U.S. sanctions on Iran that are expected to remove oil from the global market.
Sale of the oil from the reserve was mandated by previous laws to fund the federal government and to fund a drug program, but the Trump administration took the earliest available time to sell the crude under the law.
The sale's timing "would appear to reflect President Donald Trump's concern regarding oil market tightness associated with the reinstatement of Iran oil sanctions," analysts at ClearView Energy Partners said after the sale was announced on August 20.

Any wonder they want to control Venezuela oil?

Amon , says: January 30, 2019 at 12:07 pm GMT
@Carlton Meyer A slight correction is needed here. The UK, Germany, Israel and France has signed onto this.

Just as all four of them were more than willing to help smash Libya to dust so they could steal their oil fields and all that gold Gaddafi had hoarded up for his independent gold back African currency.

Truly, Venezuela will be a Libya 2.0.

Honesty , says: January 30, 2019 at 1:17 pm GMT
I think what is happening in Venezuela is not an isolated event. It is connected to a broad "connect the dots" South American strategy. The other dots are:

1) Bolsonaro's election victory.
2) Changes in structural relationship with Argentina, Chile, Colombia.
3) Cuba isolation.
4) Bolivia isolation.
5) And finally the recent unexpected dam collapse in Brazil, followed by IDF's offer to fly in hundreds of soldiers to help.

S America is about to become the next Middle East (Syria). Weapons proliferation. War profiting. Mass scale disruption. Already a profound refugee crisis. And all the traditional war hawks there – with IDF leading the charge.

Harold Smith , says: January 30, 2019 at 1:28 pm GMT

"And, in effect, I wish for the success of Juan Guaido in his struggle with Maduro, and I support American diplomatic and economic pressure on Maduro to step down. After all, Venezuela is in our back yard with huge oil reserves."

So in effect, you wish for the success of the globalists in their relentless struggle with the concept of national sovereignty and the rule of law, and you support American imperialist efforts to overthrow yet another democratically elected government, no matter how many people have to die in the process. After all, the victim country is relatively close and its huge oil reserves make for a reasonable pretext.

jacques sheete , says: January 30, 2019 at 2:23 pm GMT

Venezuela, the Deep State, and Subversion of the Trump Presidency

Also on UR, link to,

Bolton: We're Taking Venezuela's Oil
Yesterday, Trump's National Security Advisor John Bolton made the US position clear in a FoxNews interview: Washington will overthrow the Venezuelan
RON PAUL LIBERTY REPORT

nsa , says: January 30, 2019 at 3:12 pm GMT
@Johnny Rico "How many barrels a day does Venezuela pump?"
Something like 50,000 barrels per day. And pumped is perhaps the wrong word more like mined. Venezuelan oil is locked up in surface tar sands along the Orinoco River and of very low quality, rich in metals such as vanadium which catalyze sulfur into sulfuric acid rotting out engines and turbines if not cleaned up. It is actually sold as a emulsion with about 25% water to get the stuff to flow. The Canadian tar sands now produce something like 500,000 barrels per day. Try driving through the Alberta tar sands to see mommie earth ravaged without conscience and birds murdered en masse landing on their vast polluted effluent ponds but then the loathsome colonial denizens of our Canadian satrap to the north don't care as long as we let them have a couple of hockey teams and legal pot.
AnonFromTN , says: January 30, 2019 at 4:20 pm GMT
Whoever believed that Trump will drain the swamp must feel disappointed. The US foreign policy is run by the swamp now, like it always was. The US uses full range of classical gangster tactics against Venezuela: blackmail, theft of assets, threats, etc. The US tries to instigate yet another "color revolution" to bring yet another puppet to power in yet another country. The only difference is, Maduro resists. But that's the difference in the victim country, not in DC.
By-tor , says: January 30, 2019 at 4:28 pm GMT
@Tyrion 2 Venezuela is under US sanctions that substitute for a medieval siege, and Venezuela's comprador ruling class are Wall Street loyalists, not nationalists. The US is trying to starve the population of Venezuela and economically ruin them wherein a US puppet gov't will enable predatory Americans to buy coveted resources on the cheap. This usurpation of int'l law and criminality was pulled off by Obama-Nuland-Soros in Ukraine in 2014. The majority of Venezuelan 'deplorables' who are bearing the brunt of US sanctions know well what Uncle Sham's man-on-the-ground Guaido is up to, and have, hopefully, organized and armed themselves with rifles to defend their lives and property from invaders.
follyofwar , says: January 30, 2019 at 4:30 pm GMT
@Amon It's possible that Venezuela will be another Libya. But I question whether the US Imperialists could get away with weeks of saturation bombing on a country in the same hemisphere, just to its south. I find it hard to believe that the rest of South America would take this lying down. Then there's the presence of Russia and China, who both have substantial investments in the country. Will they just sit on their hands too?

With its jungles and mountains, any US invasion would be more like Vietnam, I think. This could be, and I hope it is, a Bridge Too Far for the Empire. Empires always eventually overreach.

Rags , says: January 30, 2019 at 4:36 pm GMT
But, bbbuuuttt, I thought we were gonna be energy independent and export oil all over the globe. What need have we of some heavy crude in Venezuela if this forecast is at hand? Just hedging the BS ya know.
Sergey Krieger , says: January 30, 2019 at 4:44 pm GMT
Maduro and Chavez are as socialist as I am capitalism fan. They are indeed populist dictators and regime is still capitalistic. They just rely upon lumpens and military to hold onto power. Things wound not change for the better and probably for worse if coup succeeds though. Now, it is neither USA nor author's business to interfere into other countries affairs as Americans quite obviously only make things worse and what if when USA finally kicks the bucket as United country others start interfering in USA affairs ? I actually see it coming considering demographic and cultural realities on the ground in USA. Once $usd is gone as reserve currency the process as Gorbachiv stated would start.
republic , says: January 30, 2019 at 4:46 pm GMT

Last week suddenly there was a coup d'etat in Venezuela,

actually the use of the term coup d'etat is incorrect. A coup occurs when the military disposes the government and replaces it with a military government.

This has not yet occurred. It has not yet been successful, what is actually happening is the beginning of a civil war, the outcome which is not clear.

The situation bears a certain similarity with the beginning of the Syrian civil War.

If it follows the Ukrainian scenario like what took place in 2014, then I would expect some type of situation where foreign mercenaries are employed to create divisions in the population, like firing on the opposition supporters. It is highly likely that some sort of false flag incident will be use to fire up the situation.

If the military were to revolt and replace it with civilian rule it would be called a pronunciamiento

AnonFromTN , says: January 30, 2019 at 5:16 pm GMT
Trump just congratulated self-proclaimed US puppet Guaido in Venezuela. So, he can no longer pretend to be an innocent bystander: he showed himself to be a willing participant in the criminal activities of the swamp.

Three notes on the bright side. One, the Empire is getting ever more reckless, no longer bothers even with fig leaves. That looks like an overreach typical of empires in their death throws. Two, Maduro, despite his obvious failings, appears to be prepared to defend his country against banditry. So, maybe he is not just a piece of shit, like Yanuk in Ukraine. We'll see soon enough. Three, Erdogan, who the same gangsters tried to overthrow not too long ago, remembers that and voiced his support of Maduro in no uncertain terms, despite Turkey being a NATO member.

[Jan 29, 2019] Bloodbath In Oil Gas Stocks Could Continue by Nick Cunningham

Notable quotes:
"... In the meantime, the strategy for oil and gas executives to appease investors is to focus on "quick cash, quarterly payouts and fast talk," Sanzillo says. "Either way the stocks lack a long-term value rationale." ..."
"... Meanwhile, the Wall Street Journal reports that the U.S. shale industry has been over-hyping the production potential from their wells. The WSJ compared well-productivity estimates from shale companies to those from third parties. After looking at the production data at thousands of wells and how much oil and gas those wells were on track to produce over the course of their lifespans, the WSJ found that company forecasts seemed to be misleading. ..."
"... Schlumberger, for instance, has reported that secondary shale wells near older wells in West Texas have been 30 percent less productive than the initial wells, the WSJ found. Also, many shale companies used data from their best wells and extrapolated forward, projecting enormous growth numbers that have not panned out. ..."
Jan 04, 2019 | finance.yahoo.com

Of course, that is largely just a reflection of the sharp decline in oil prices. But the share prices of most oil and gas companies are also largely based on oil price movements. So, the steep slide in oil prices in the final two months of 2018 led to disaster for investors in energy stocks.

"The stock market went to hell in December. And when it got there, it found that the energy sector had already moved in, signed a lease and decorated the place," Tom Sanzillo, Director of Finance at the Institute for Energy Economics and Financial Analysis (IEEFA), wrote in a commentary .

The energy sector was at or near the bottom of the S&P 500 for the second year in a row, Sanzillo pointed out. And that was true even within segments of the oil and gas industry. For instance, companies specializing in hydraulic fracturing fell by 30 percent, while oil and gas supply companies lost 40 percent. "The fracking boom has produced a lot of oil and gas, but not much profit," Sanzillo argued.

Looking forward, there are even larger hurdles, especially in the medium- to long-term. Oil demand growth is flat in developed countries and slowing beginning to slow in China and elsewhere. The EV revolution is just getting started.

The last great hope for the oil industry is to pile into petrochemicals , as oil demand for transportation is headed for a peak. But profits in that sector could also prove elusive. "The industry's rush to invest in petrochemicals to maintain demand for oil and gas is likely to continue, but the profit potential in this sector is more limited than oil and gas exploration, and is likely to keep the energy sector at or near the bottom of the S&P 500," Sanzillo concluded.

In the meantime, the strategy for oil and gas executives to appease investors is to focus on "quick cash, quarterly payouts and fast talk," Sanzillo says. "Either way the stocks lack a long-term value rationale."

Meanwhile, the Wall Street Journal reports that the U.S. shale industry has been over-hyping the production potential from their wells. The WSJ compared well-productivity estimates from shale companies to those from third parties. After looking at the production data at thousands of wells and how much oil and gas those wells were on track to produce over the course of their lifespans, the WSJ found that company forecasts seemed to be misleading.

Related: 2019 Could Make Or Break OPEC

"Two-thirds of projections made by the fracking companies between 2014 and 2017 in America's four hottest drilling regions appear to have been overly optimistic, according to the analysis of some 16,000 wells operated by 29 of the biggest producers in oil basins in Texas and North Dakota," reporters for the WSJ wrote . "Collectively, the companies that made projections are on track to pump nearly 10% less oil and gas than they forecast for those areas, according to the analysis of data from Rystad Energy AS, an energy consulting firm."

Schlumberger, for instance, has reported that secondary shale wells near older wells in West Texas have been 30 percent less productive than the initial wells, the WSJ found. Also, many shale companies used data from their best wells and extrapolated forward, projecting enormous growth numbers that have not panned out.

The upshot is that shale companies will have to step up spending in order to hit the promised production targets. However, so many of them have struggled to turn a profit, and the recent downturn in oil prices has put even more pressure on them to rein in costs.

That raises questions about the production potential not just from individual shale companies, but also from the U.S. as a whole.

By Nick Cunningham of Oilprice.com

[Jan 29, 2019] Will Oil Prices Rise in 2019?

The problem is that the lower average price of oil, the less capex are for the year. And that creates problems in two to three years period.
As long as shale oil producers are capable to produce junk bond, they will continue extraction even in prize zone below $60, where they can't recover the costs. Cheerleaders from IEA will continue to produced nice rising curves.
Jan 08, 2019 | community.oilprice.com

Tom Kirkman

23 hours ago, William Edwards said:

Rather than troubling you by disagreeing, Tom, may I request, instead, your basis for selecting $70 as the point where the economy and oil producers meet? My method uses step-wise accumulation of production, from lowest cost to highest cost, to reach the required 100 MMB/D of worldwide total demand. The reputable numbers for that exercise suggest lower than $60/B. As Canadian Oil Sands producers will confirm, the producer does not always cover his cost. So the $60 number is higher than the practical top. (This explains why the actual average price over history is $40.)

The reality is that as long as you have spare producing capacity, which we always do, that can produce oil at less than $10/B as your competition, you can forget recovering your higher cost unless you can hoodwink the traders. Of course, the hoodwinked traders' motto is "Fooled me once, shame on you! Fooled me twice, shame on me!

Nicely put, William.

The niggling thing about the $40 average price over history is that the bulk of the easy, cheap oil appears to be extracted already. Low-hanging black oil fruit already harvested.

Which means that extraction costs will increase.

So... while $40 is historically accurate for oil, that number is not static, and seems it must inevitably rise, as it becomes increasingly expensive to extract the black oil fruit from further up the tree - easy pickings gone already.

U.S. Shale Oil pundits generally seem to agree that $50 or so is the breakeven point for WTI region light tight oil. Removing existing and earlier compounded debts from the equation, I reckon that sounds about correct. Add in debts though, and it's probably closer to $80.


Osama

Hi!

Here are my thoughts on oil prices for 2019 (short term). Would love to have your thoughts on it.

https://seekingalpha.com/article/4231469-will-oil-prices-rise-2019

Tom Kirkman

I fully expect oil prices [Brent] to rise to around $70 average for 2019. WTI is a totally different animal.

https://community.oilprice.com/topic/4587-hmmm-sounds-oddly-familiar-70-oil-could-be-right-around-the-corner/?do=embed

https://community.oilprice.com/topic/4220-oil-slide-worries-traders-relax-this-should-get-sorted-by-year-end/?do=embed

If anybody here hasn't heard my hundreds of ad nauseum comments this entire dang year about my hope for $65 oil [Brent] for 2018 and my hope for $70 oil [Brent] for 2019, please raise your hand, and I can reiterate yet again .

Meanwhile, I'll gently remind that I already warned repeatedly this year that $80 is simply not sustainable, and that the higher that oil goes above $70 then the harder the eventual crash would likely be.

And over to the news, would everyone kindly lay off guzzling the pots of coffee and stop artificially panicking. Near as I can tell, $70 - ish oil for 2019 still seems about the right balance between the global economy and oil producers. I hope the current over-reaction on the oil price See Saw will settle back to around $70 by end of this year or early next year. Just my opinion; as always, you are free to disagree.

Karl V

hellenicshippingnews.com said yesterday , that the average price for WTI had been $65 and $72 for Brent in year 2018 , with a high at 3rd October and low at 24th December .

Overall , I would predict a lower average for 2019 , than for 2018 ; average prices like during years 2015 and 2016 ($50) .

Opec+ might throttle supply , but if Iran sanctions will screw further , Opec+ will be able to push more oil onto the markets .

Venezuela might get online again , since I can't believe , that China and Russia will stay neutral in regards to their investments .

Brazil will deliver more , and Mexico probably could reduce domestic oil theft .

Canada is only capable to throttle production , due to authoritie's measures , if drillers are left to heir own devices , the production in Canada will rise again .

Without any governmental regulations worldwide (International Socialism) oil could cost even $20 and less .

Nevertheless , WTI and Brent likely are worth more than many crudes , since they have short ways to their markets : The lower the transportation costs , the higher the oil price .

Electric Vehicles are still not yet deployed much , but in 10 years may make up to 10% of cars in use worldwide .

Power-To-Gas and -To-Gasoline will likely become deployed in the next 10 years to come , increasing the pressure on crude oil prices .

From tecson.de : https://www.tecson.de/historische-oelpreise.html

Osama
On 1/5/2019 at 1:49 AM, Tom Kirkman said:

I fully expect oil prices [Brent] to rise to around $70 average for 2019. WTI is a totally different animal.

https://community.oilprice.com/topic/4587-hmmm-sounds-oddly-familiar-70-oil-could-be-right-around-the-corner/?do=embed

https://community.oilprice.com/topic/4220-oil-slide-worries-traders-relax-this-should-get-sorted-by-year-end/?do=embed

If anybody here hasn't heard my hundreds of ad nauseum comments this entire dang year about my hope for $65 oil [Brent] for 2018 and my hope for $70 oil [Brent] for 2019, please raise your hand, and I can reiterate yet again .

Meanwhile, I'll gently remind that I already warned repeatedly this year that $80 is simply not sustainable, and that the higher that oil goes above $70 then the harder the eventual crash would likely be.

And over to the news, would everyone kindly lay off guzzling the pots of coffee and stop artificially panicking. Near as I can tell, $70 - ish oil for 2019 still seems about the right balance between the global economy and oil producers. I hope the current over-reaction on the oil price See Saw will settle back to around $70 by end of this year or early next year. Just my opinion; as always, you are free to disagree.

What are your thoughts on the recent news regarding Shale wells drying fast than they should...I read in WSJ.

Also, $70 doesn't looks that impossible too...yes.

Summer Driving Season and if and when a thaw between U.S. and China's trade war....can certainly take oil to the said level.

NWMan
On 1/5/2019 at 9:39 AM, Karl V said:

Without any governmental regulations worldwide (International Socialism) oil could cost even $20 and less  .

Oil could only cost $20, if Saudi Arabia decided to supply the world with oil by itself - a large amount of our oil supply is from offshore Nigeria, Angola, Gulf of Mexico (Mexico - USA), North Sea, Brazil, Oil sands, Oil shale, - these locations require $60 oil minimum.

Osama
On 1/7/2019 at 11:20 AM, NWMan said:

Oil could only cost $20, if Saudi Arabia decided to supply the world with oil by itself - a large amount of our oil supply is from offshore Nigeria, Angola, Gulf of Mexico (Mexico - USA), North Sea, Brazil, Oil sands, Oil shale, - these locations require $60 oil minimum.

Well....Mr. @William Edwards here have explained the pricing in a very cogent manner. I'd find the link of the discussion and post it.here.

tetonper

If you are buying oil indexes price of oil is important. If you are buying stocks the question is, will prices go up or down on stocks. There are a lot of companies that are making a profit at the lower prices. Furthermore there is a lot of companies with significant cash on hand. They also have low P/E, some in single digits and others in low double digits. Combine this with the fact that with a little research many of these stocks are rated sells or at best hold and analysts are rating them as bearish or extremely bearish, there is a good opportunity for some significant increase. Especially in a market that is still very high. Granted if the market tumbles again, it is hard to go against the tide. Looks like there is a lot of money to be made in some of these stocks. Some of them will assuredly be targets for bigger companies wanting to consolidate acreage, others wanting stronger positions in the Permian, Eagle Ford and SCOOP/STACK plays. Over the next month and maybe 2 there will be a lot of money made. There is also a lot of insider trading going on, such as the purchase of $4 million in CHK by an exec. Not a fan of CHK but there are a lot of people who have made a lot of money on them in recent weeks. The reality is oil prices probably won't plunge even if the stock market goes south in an ugly fashion again, and with Saudis, Iran and reduction in rigs in the shale plays across America, market sentiment will probably carry prices at least through mid-Feb. That is plenty of time for oil and gas stocks to claw back some gains based on the big fall they have had. Just my thoughts after 40 years of working in and watching this industry.

Tom Kirkman
On 1/7/2019 at 10:51 AM, Osama said:

Wha  t  are your thoughts on the recent news regarding Shale  wells drying fast than they should...I read in WSJ. 

https://community.oilprice.com/topic/4652-happy-dance-us-shale-oil-slowdown/?do=embed

William Edwards

Will Prices Rise in 2019? Yes, and fall, and end the year much lower than most observers expect. Hint: IMO 2020.

William Edwards
On 1/5/2019 at 1:49 AM, Tom Kirkman said:

I fully expect oil prices [Brent] to rise to around $70 average for 2019. WTI is a totally different animal.

https://community.oilprice.com/topic/4587-hmmm-sounds-oddly-familiar-70-oil-could-be-right-around-the-corner/?do=embed

https://community.oilprice.com/topic/4220-oil-slide-worries-traders-relax-this-should-get-sorted-by-year-end/?do=embed

If anybody here hasn't heard my hundreds of ad nauseum comments this entire dang year about my hope for $65 oil [Brent] for 2018 and my hope for $70 oil [Brent] for 2019, please raise your hand, and I can reiterate yet again .

Meanwhile, I'll gently remind that I already warned repeatedly this year that $80 is simply not sustainable, and that the higher that oil goes above $70 then the harder the eventual crash would likely be.

And over to the news, would everyone kindly lay off guzzling the pots of coffee and stop artificially panicking. Near as I can tell, $70 - ish oil for 2019 still seems about the right balance between the global economy and oil producers. I hope the current over-reaction on the oil price See Saw will settle back to around $70 by end of this year or early next year. Just my opinion; as always, you are free to disagree.

Rather than troubling you by disagreeing, Tom, may I request, instead, your basis for selecting $70 as the point where the economy and oil producers meet? My method uses step-wise accumulation of production, from lowest cost to highest cost, to reach the required 100 MMB/D of worldwide total demand. The reputable numbers for that exercise suggest lower than $60/B. As Canadian Oil Sands producers will confirm, the producer does not always cover his cost. So the $60 number is higher than the practical top. (This explains why the actual average price over history is $40.) The reality is that as long as you have spare producing capacity, which we always do, that can produce oil at less than $10/B as your competition, you can forget recovering your higher cost unless you can hoodwink the traders. Of course, the hoodwinked traders' motto is "Fooled me once, shame on you! Fooled me twice, shame on me!

Tom Kirkman
23 hours ago, William Edwards said:

Rather than troubling you by disagreeing, Tom, may I request, instead, your basis for selecting $70 as the point where the economy and oil producers meet? My method uses step-wise accumulation of production, from lowest cost to highest cost, to reach the required 100 MMB/D of worldwide total demand. The reputable numbers for that exercise suggest lower than $60/B. As Canadian Oil Sands producers will confirm, the producer does not always cover his cost. So the $60 number is higher than the practical top. (This explains why the actual average price over history is $40.) The reality is that as long as you have spare producing capacity, which we always do, that can produce oil at less than $10/B as your competition, you can forget recovering your higher cost unless you can hoodwink the traders. Of course, the hoodwinked traders' motto is "Fooled me once, shame on you! Fooled me twice, shame on me!

Nicely put, William.

The niggling thing about the $40 average price over history is that the bulk of the easy, cheap oil appears to be extracted already. Low-hanging black oil fruit already harvested.

Which means that extraction costs will increase.

So... while $40 is historically accurate for oil, that number is not static, and seems it must inevitably rise, as it becomes increasingly expensive to extract the black oil fruit from further up the tree - easy pickings gone already.

U.S. Shale Oil pundits generally seem to agree that $50 or so is the breakeven point for WTI region light tight oil. Removing existing and earlier compounded debts from the equation, I reckon that sounds about correct. Add in debts though, and it's probably closer to $80.

William Edwards
23 hours ago, Tom Kirkman said:

Nicely put, William.

The niggling thing about the $40 average price over history is that the bulk of the easy, cheap oil appears to be extracted already. Low-hanging black oil fruit already harvested.

Which means that extraction costs will increase.

So... while $40 is historically accurate for oil, that number is not static, and seems it must inevitably rise, as it becomes increasingly expensive to extract the black oil fruit from further up the tree - easy pickings gone already.

U.S. Shale Oil pundits generally seem to agree that $50 or so is the breakeven point for WTI region light tight oil. Removing existing and earlier compounded debts from the equation, I reckon that sounds about correct. Add in debts though, and it's probably closer to $80.

May I differ on one point? Low-hanging fruit is forever! I do no know for sure, since my x-ray vision fails below 5000 ft, how much cheap oil lies below the Saudi (and Iraq and Iranian) deserts. But I do know two things. 1) I have been told for forty years that the proven reserves in Saudi Arabia are 300 Billion barrels. It has not changed even though 10,000,000 B/D are pumped out continuously. But I do not have to know. I only need to know if it will ever run out. I am sure that it will not. The oil under the desert will, someday, be worth no more than the sand that covers the desert. 2) Quantity of reserves is like spare capacity. As long as there is enough, it matters not how much more than "enough" exists. As long as the Middle East reserves are not running at full capacity and fully depleted, $10 oil will be available. Must I remind you that the stone age did not run out of stones? Or the nuclear age run out of uranium? Better replaces inferior.

[Jan 23, 2019] Venezuela Oil Sanctions Likely to Hit Some U.S. Refiners Hard - Bloomberg

Jan 23, 2019 | www.bloomberg.com

Some U.S. Refiners Hard

By
Lucia Kassai , Jennifer A Dlouhy , and David Marino
‎January‎ ‎23‎, ‎2019‎ ‎5‎:‎18‎ ‎PM Venezuela Oil Sanctions Likely to Hit Some U.S. Refiners Hard
By
Lucia Kassai , Jennifer A Dlouhy , and David Marino
, ‎January‎ ‎23‎, ‎2019‎ ‎5‎:‎18‎ ‎PM
Source: Bloomberg
Source: Bloomberg

Refiners in Texas and Louisiana would be hard hit by sanctions on Venezuelan crude under consideration at the White House, a move that would leave U.S. oil companies struggling to find alternative supplies.

President Donald Trump recognized Juan Guaido as the interim president of Venezuela on Wednesday in the most provocative move yet against the leftist regime of Nicolas Maduro. Maduro responded by breaking diplomatic relations with the U.S., giving American diplomats 72 hours to leave the country. The Trump administration has drafted a slate of sanctions but hasn't decided whether to deploy them, said people familiar with the matter. Earlier this month, White House officials warned U.S. refiners that sanctions were being considered, and advised them to seek alternative sources of heavy crude. Some U.S. refiners worried about sanctions experimented with alternatives last year before ultimately returning to Venezuelan crude.

The hardest-hit would be Citgo Petroleum Corp., the refining arm of Petroleos de Venezuela SA , or PDVSA, the state-run oil company. Citgo imported the most Venezuelan crude in the first 10 months of 2018, followed by Valero Energy Corp.

Royal Dutch Shell Plc and Phillips 66 haven't processed Venezuelan crude in their U.S. refineries since the U.S. imposed financial sanctions against the country and PDVSA in August 2017. Marathon Petroleum Corp., Total SA and Motiva Enterprises LLC cut intake by more than a half during that period, and as Venezuelan oil production slumped to the lowest levels seen since the 1940s.

Oil companies have urged the Trump administration not to limit imports of Venezuelan oil, warning the action could disadvantage Gulf and East Coast refiners designed to handle the country's heavy crude, while also causing gasoline prices to rise.

[Jan 22, 2019] Saudi trick before the cut in 2019

Notable quotes:
"... That works out to be 320,000 barrels per day. Saudi production increased by 384,000 barrels per day during November. So Saudi's November increase was mostly just emptying their storage tanks. ..."
Jan 22, 2019 | peakoilbarrel.com

Energy News says: 01/21/2019 at 8:03 am

2019-01-21 (JODI Data) Saudi Arabia crude oil inventories declined by -9.6 million barrels in November
Chart on Twitter https://pbs.twimg.com/media/Dxb2106X0AEVusm.jpg
Ron Patterson says: 01/21/2019 at 8:27 am

That works out to be 320,000 barrels per day. Saudi production increased by 384,000 barrels per day during November. So Saudi's November increase was mostly just emptying their storage tanks.

And from looking at your chart, it looks like the 135,000 barrel per day increase in October was from the same source.

Saudi cuts start from a base of 10,633,000 barrels per day. That is almost their exact production in October. And your chart shows Saudi inventories had been dropping for months. Saudi had obviously been preparing to "cut" production from a level of production they reached by emptying their storage tanks.

[Jan 21, 2019] IEA OPEC+ Cuts Put Floor Under Oil Prices

Jan 21, 2019 | oilprice.com

OPEC released its Oil Market Report in recent days, which showed that the cartel slashed output by 750,000 bpd in December – sharp reductions that came before the deal even went into effect. Saudi Arabia led the way with 468,000 bpd in reductions, but its efforts were aided by the involuntary losses from Iran (-159,000 bpd), Libya (-172,000 bpd) and Venezuela (-33,000) bpd.

In fact, those three countries have accounted for massive output reductions over the past two months. The OPEC+ deal is using October as a baseline, calling for 1.2 million barrels per day (mb/d) in reductions, and the group is well on their way thanks to turmoil in just a few countries. Over the course of November and December, Iran has lost 561,000 bpd, Libya has lost 190,000 bpd, and Venezuela's output fell by 58,000 bpd. Taken together, the involuntary outages exceed 800,000 bpd.

[Jan 14, 2019] Seventy dollars per barrel for the end of the 2019 looks entirely reasonable price for some experts

But that probably does not not including possible "back channel" from the US government to major banks which allow them to finance unprofitable oil extraction.
Notable quotes:
"... $70/b by the end of 2019 is very reasonable [estimate] and actually similar to many of the major banks. The $55/b average expectation of oil executives according to Dallas Fed is too low in my opinion. ..."
Jan 14, 2019 | peakoilbarrel.com

GuyM

x Ignored says: 01/13/2019 at 1:52 pm
https://oilprice.com/Energy/Energy-General/Could-Oil-Prices-Rise-By-25-Per-Barrel-In-2019.html

Not too unreasonable. Higher than most.

Dennis Coyne x Ignored says: 01/13/2019 at 4:29 pm
GuyM,

Agree, Rapier is very good. $70/b by the end of 2019 is very reasonable [estimate] and actually similar to many of the major banks. The $55/b average expectation of oil executives according to Dallas Fed is too low in my opinion. Rapier is spot on (within $5/b of being correct) imo.

GuyM x Ignored says: 01/13/2019 at 5:03 pm
I think the inventory draws will be much deeper than most expect, so it could be higher.
Dennis Coyne x Ignored says: 01/14/2019 at 8:06 am
GuyM,

Much depends on what ROI is acceptable for an oil company, if they require a 15% ROI, then the average 2017 Permian Basin well (average cost full cycle assumed to be $9.5 million) needs $66/b at refinery gate ($62/b at wellhead) to meet that hurdle, EUR is about 411 kb.

Fernando L x Ignored says: 01/14/2019 at 4:08 pm
See how my old $63 per barrel model is not that bad after all? Right now it's a bit higher, about $70.

[Jan 14, 2019] Peak Oil Review 14 January 2019

Notable quotes:
"... The news that the Saudis will cut even more production than specified in their recent pledge in hopes of raising world prices to $80 a barrel was an important part of last week's price jump. Hopes that the US and China would settle their trade dispute during on-going talks was also an important factor in the recent price jump. ..."
"... While the US economy has been bumping along nicely in recent months, the same is not true for the other major centers of economic power – China and Europe. ..."
"... The Limits to Growth ..."
Jan 14, 2019 | mailchi.mp

Oil prices continued to climb last week and are now some $10 a barrel higher than they were just before Christmas when recent lows were set. Prices now have retraced about 30 percent of the $35 a barrel drop that took place between late September and late December. Part of the recent price correction likely is due to technical factors such as closing out long positions in the futures markets. The news that the Saudis will cut even more production than specified in their recent pledge in hopes of raising world prices to $80 a barrel was an important part of last week's price jump. Hopes that the US and China would settle their trade dispute during on-going talks was also an important factor in the recent price jump.

Looming over the talk about OPEC+ production cuts and how fast US shale oil production might grow are the prospects for the global economy. A major recession could drive the demand for oil so low that even current prices would be difficult to maintain. While there have always been people convinced that a major economic crash is in the offing, in recent weeks there has been a noticeable increase in the number and stridency of these predictions.

While the US economy has been bumping along nicely in recent months, the same is not true for the other major centers of economic power – China and Europe. The Washington Post headlines that "Economic growth is slowing all around the world," citing declines in the equity markets; sputtering German factories, and Chinese retail sales growing at their slowest pace in 15 years. Even Beijing is looking for its GDP to grow by 6-6.5 percent this year which is way off from the heady days of double digits ten years ago.

Eurozone economic forecasts fell last Monday again after a survey of economists found that GDP is expected to grow just below 1.6 percent this year, 0.4 percentage points lower than an already conservative estimate from March. A new report from the World Bank, citing a variety of data, including softening international trade and investment, ongoing trade tensions, and financial turmoil concludes that "the outlook for the global economy in 2019 has darkened."

Among the darker forecasts for the future are those that speculate on a global depression on the scale of the 1930s where GDPs fall by 10 to 25 percent. Others are saying that the global economy may be approaching " The Limits to Growth " as discussed in the famous 1972 book.

... ... ...

Virendra Chauhan of Energy Aspects told CNBC last week that "$50 oil is not a level at which US producers can generate cash flow and production growth, so we do expect a slowdown." In a Bloomberg radio interview John Kilduff, founding partner of Again Capital Management, said "we were getting into the zone where U.S. shale producers stop making money particularly when you sort of add in all the costs, not just the pure say drilling and extraction. It's going to start to get tough for them right now."

... ... ...

Iran : Iran's crude exports dropped to 1 million b/d in November from 2.5 million b/d in April, taking exports back to where they stood during the 2012-2016 sanctions. According to three companies that track Iranian exports, Tehran's crude shipments remained below 1 million b/d in December and are unlikely to exceed that level in January. Tracking

... ... ...

Iraq : Baghdad posted its highest monthly export total to date in December and, combined with Kurdistan, set a nationwide annual record of 4.15 million b/d -- more than 100,000 b/d above the previous record, set in December 2016. The government said on Friday it is committed to the OPEC+ output-cutting deal and would keep its oil production at 4.513 million b/d for the first half of 2019

... ... ...

Saudi Arabia : According to OPEC officials, Saudi Arabia is planning to cut crude exports to around 7.1 million b/d by the end of January in hopes of lifting oil prices above $80 a barrel.

... ... ...

Libya: Tripoli plans to pump 2.1 million b/d of crude oil by 2021 if the security situation improves, the chairman of the National Oil Corporation said last week. The plan would represent a doubling of the current rate of production, which currently stands at 953,000 b/d.

... ... ....

4. Russia

Moscow has already lowered its oil output by around 30,000 b/d compared with October volumes, which is used as the baseline under the latest OPEC/non-OPEC crude production agreement. Russian energy minister Novak said Friday: "We are gradually lowering output; our plan is that overall production in January will be 50,000 b/d less than in October."

[Jan 14, 2019] Norway's Oil Production To Fall To 30-Year Low

Notable quotes:
"... Last year, oil production in Norway fell to 1.49 million barrels per day (bpd), down by 6.3 percent compared to the 1.59 million bpd production in 2017, the oil industry regulator, the Norwegian Petroleum Directorate (NPD), said in its annual report this week. Oil production this year is forecast to drop by another 4.7 percent from last year to reach in 2019 its lowest level in thirty years -- 1.42 million bpd, the NPD estimates show. ..."
"... However, the Norwegian oil regulator warned that "resource growth at this level is not sufficient to maintain production of oil and gas at a high level after 2025. Therefore, it is essential that more profitable resources are proven in the next few years." ..."
"... The industry's problem is that after Johan Sverdrup and Johan Castberg there haven't been major discoveries. ..."
Jan 14, 2019 | www.zerohedge.com

Norway's Oil Production To Fall To 30-Year Low

by Tyler Durden Mon, 01/14/2019 - 14:17 9 SHARES Authored by Tsvetana Paraskova via Oilprice.com,

Despite cost controls, increased efficiency, and higher activity offshore Norway, oil production at Western Europe's largest oil producer fell in 2018 compared to 2017 and is further expected to drop this year to its lowest level since 1988.

Last year, oil production in Norway fell to 1.49 million barrels per day (bpd), down by 6.3 percent compared to the 1.59 million bpd production in 2017, the oil industry regulator, the Norwegian Petroleum Directorate (NPD), said in its annual report this week. Oil production this year is forecast to drop by another 4.7 percent from last year to reach in 2019 its lowest level in thirty years -- 1.42 million bpd, the NPD estimates show.

As bad as it sounds, this year's expected low production is not the worst news for the Norwegian Continental Shelf (NCS) going forward.

Oil production is expected to jump in 2020 through 2023, thanks to the start up in late 2019 of Johan Sverdrup -- the North Sea giant, as operator Equinor calls it. With expected resources of 2.1 billion -- 3.1 billion barrels of oil equivalent, Johan Sverdrup is one of the largest discoveries on the NCS ever made. It will be one of the most important industrial projects in Norway in the next 50 years, and at its peak, the project's production will account for 25 percent of Norway's total oil production, Equinor says.

The worst news for Norway's oil production, as things stand now, is that after Johan Sverdrup and after Johan Castberg in the Barents Sea scheduled for first oil in 2022, Norway doesn't have major oil discoveries and projects to sustain its oil production after the middle of the 2020s.

The NPD started warning last year that from the mid-2020s onward, production offshore Norway will start to decline "so making new and large discoveries quickly is necessary for maintaining production at the same level from the mid-2020s."

In the report this week, NPD Director General Bente Nyland said:

"The high level of exploration activity proves that the Norwegian Shelf is attractive. That is good news! However, resource growth at this level is not sufficient to maintain a high level of production after 2025. Therefore, more profitable resources must be proven, and the clock is ticking".

Norwegian oil production in 2018 was expected to drop compared to the previous year, but the decline "proved to be greater than expected," the NPD said, attributing part of the production fall to the fact that some of the newer fields are more complex than previously assumed, and certain other fields delivered below forecast, mainly because fewer wells were drilled than expected.

In October 2018, Germany's Wintershall warned that its Maria oil and gas field off Norway was not fully meeting expectations due to issues with water injection. Those issues haven't been solved yet, NPD's Nyland told Reuters this week.

Exploration activity in Norway considerably increased in 2018 compared to 2017, with 53 exploration wells spud, up by 17 wells compared to the previous year. Based on company plans, this year's exploration activity is expected to remain high and around the 2018 number of wells spud, the NPD says.

The key reasons for higher exploration activity have been reduced costs, higher oil prices lifting exploration profitability, and new and improved seismic data on large parts of the Shelf, the NPD noted.

However, the Norwegian oil regulator warned that "resource growth at this level is not sufficient to maintain production of oil and gas at a high level after 2025. Therefore, it is essential that more profitable resources are proven in the next few years."

Norway still holds a lot of oil under its Shelf, and those remaining resources could sustain its oil and gas production for decades to come. The industry's problem is that after Johan Sverdrup and Johan Castberg there haven't been major discoveries.

According to the NPD's resource estimate, nearly two-thirds of the undiscovered resources lie in the Barents Sea.

"Therefore, this area will be important for maintaining production over the longer term," the regulator said.

Operators on the NCS have made great efforts to try to make even smaller discoveries profitable by hooking them to existing platforms and production hubs. However, these smaller finds alone can't offset maturing production -- Norway needs major oil discoveries, and it needs them soon , considering that the lead time from discovery to production is several years.

[Jan 14, 2019] Chinese crude oil imports are up almost ten percent in one year

Jan 14, 2019 | peakoilbarrel.com

Energy News x Ignored says: 01/14/2019 at 6:22 am

Chinese crude oil imports up +9.9% higher in full year 2018 compared to FY 2017.
The month of December up +29.9% higher than Dec 2017

2019-01-14 OilyticsData
Another big crude import number from China (2nd consecutive month of imports above 10 MMB/D). Low oil prices and startup of mega refineries such as RongSheng and Hengli is helping to keep these numbers near record levels.(Source; GAC China)
Chart https://pbs.twimg.com/media/Dw3fk2GXcAUZ_Vu.jpg
Oilytics https://twitter.com/OilyticsData

[Jan 13, 2019] Did Trade Talks Impact Oil-Weighted Stocks More than Oil by Robert Scott

Notable quotes:
"... All of these oil-weighted stocks are part of the SPDR S&P Oil & Gas Exploration & Production ETF ( XOP ). They have production mixes of at least 60.0% in liquids based on their latest quarterly production data. Liquids include crude oil, condensates, and natural gas liquids. ..."
Jan 10, 2019 | marketrealist.com
Oil-weighted stocks

The following oil-weighted stocks could be the most sensitive to US crude oil's movements. They might be impacted the most by oil's price movement based on their correlations with US crude oil active futures in the trailing week:

image001

Impact of trade talks

In the trailing week, US crude oil active futures rose 12.5%. Occidental Petroleum was the third-largest gainer on our list of oil-weighted stocks. The top gainers, Callon Petroleum ( CPE ) and Whiting Petroleum ( WLL ) rose 30.5% and 20.6%, respectively, in the trailing week despite having a mild negative correlation with oil prices. The trade talks between the US and China might have caused these stocks to increase. In the previous part, we discussed that easing trade war concerns might be behind the rise in oil prices. ConocoPhillips had the highest correlation with oil. ConocoPhillips has risen 4.8% -- the lowest among our selected oil-weighted stocks.

All of these oil-weighted stocks are part of the SPDR S&P Oil & Gas Exploration & Production ETF ( XOP ). They have production mixes of at least 60.0% in liquids based on their latest quarterly production data. Liquids include crude oil, condensates, and natural gas liquids.

[Jan 13, 2019] Catherine Austin Fitts – Federal Government Running Secret Open Bailout

Highly recommended!
Questionable, but still interesting perspective. Ignore marketing crap -- clearly there is marketing push within this presentation -- she wants your subscriptions. "This is Main Street vs Wall Street" dichotomy sounds plausible. Neoliberalism is, in essence, is the restoration of power of financial oligarchy.
But the idea of secret open bailout might explain why shale oil became so prominent despite high cost of producing it: Wall Street was subsidised via backchannels for bringing price downand supporting shale companies by the US goverment
Jan 12, 2019 | www.youtube.com

$21 trillion in "missing money" at the DOD and HUD that was discovered by Dr. Mark Skidmore and Catherine Austin Fitts in 2017 has now become a national security issue. The federal government is not talking or answering questions, even though the DOD recently failed its first ever audit.

Fitts says, "This is basically an open running bailout. Under this structure, you can transfer assets out of the federal government into private ownership, and nobody will know and nobody can stop it. There is no oversight whatsoever. You can't even know who is doing it. I'm telling you they just took the United States government, they just changed the governance model by accounting policy to a fascist government. If you are an investor, you don't know who owns those assets, and there is no evidence that you do. . . . If the law says you have to produce audited financial statements and you refuse to do so for 20 years, and then when somebody calls you on it, you proceed to change the accounting laws that say you can now run secret books for all the agencies and over 100 related entities."

In closing, Fitts says, "We cannot sit around and passively depend on a guy we elected President. The President cannot fix this. We need to fix this. . . . This is Main Street versus Wall Street. This is honest books versus dirty books. If you want the United States in 10 years to resemble anything what it looked like 20 years ago, you are going to have to do it, and there is no one else who can do it. You have to first get the intelligence to know what is happening."

Join Greg Hunter as he goes One-on-One with Catherine Austin Fitts, Publisher of "The Solari Report." Donations: https://usawatchdog.com/donations/

Stay in contact with USAWatchdog.com: https://usawatchdog.com/join/

All links can be found on USAWatchdog.com: https://usawatchdog.com/secret-money-...

Bob T 20 hours ago

Greg, with all due respect I don't you understand what CAF is saying. Forget about a dollar reset. The fascists, using the Treasury, Exchange Stabilization Fund, HUD, DOD and any agency they choose, have turned the US government into a gigantic money laundering operation. And they maintain two sets of books - the public numbers are a complete sham. Any paper assets held by private citizens are not secure, are likely rehypothecated, and when convenient can be frozen or siezed by these fascists in Washington. There is no limit to how many dollars the FED can create secretly and funnel out through the ESF/Treasury to prop up and bail out any bank, black ops, pet project, mercenary army or paper assets they choose. The missing $21 trillion is probably a drop in the bucket as there is no audit and no honest books for us to examine. In sum, all paper asset pricing in dollars is a fraud and a sham. Any paper assets you think you own, whether it be stocks, bonds, or real estate are pure illusion: they can be repriced or stolen at any time; in reality, you own nothing. To the man and woman on the street I say this: get out of paper, get out of these markets and convert to tangibles in your physical possession - and do it secretly and privately, avoid insurances, records, paper trails. This mass defrauding of the American people by this corrupt government in Washington will come crashing down when the US dollar is displaced from reserve status; this is what China and Russia and the BRICS are setting the stage for: world trade without the US dollar. When this happens, your dollars will become virtual toilet paper and all of your paper assets will go poof.

D Loydel 18 hours ago (edited)

"We have to fix this". Ok how does the individual fix this? Private armies are running around doing whatever private armies do and I, the one man, is suppose to fix this. Please, will someone tell us what we are suppose to do, specific instructions not a mix of large words that say " we must fix this", damn, we need a leader. Greg you ask almost every person you interview what the middle class should be doing to protect themselves and you never get a "real" answer, just a dance around. Also you ask numerous people what this coming change is going to look like and again, just silence or dance music, no answers. Damn we need a leader. Your trying very hard to give us information that will help us weather the coming storm, so thank you for all you do, and you do more than anyone else out there.

Forrest Byers 19 hours ago

Question, why in part do I feel I am being lied to? Is it subscription hustle or is it, don't you believe your lying eyes!

Without knowing exactly what is what, anyone who would've watched Herbert Walker Bush's funeral with reactions from those who received cards, whether they be Bush family, the Clintons, the Obamas and entourage. Jeb Bush went from being proud and patriotic to panic like the funeral that he was at was for the whole family.

Joe Biden looked like he had a major personal accident and no way to get to the bathroom for cleanup.

George W. Bush after being asked a question, of which the answer was, "Yep" then proceeded to appear resigned and stoic! What ever was on those cards essentially amounted to, for all those receiving a card, "the gig is up" and it appears they all damn well knew it.

So, Catherine Austin Fitts, explain your, "Trump is colluding with the Bushies," I would say, that Canary in this mine of inquiry is dead. I'm just an old disabled Vietnam vet of plebeian background and certainly not a revolving door Washington DC Beltway patrician, so any explanation needs to be delivered in slow, logical step-by-step progression for I have not mastered the art of selling the sizzle in hopes that the dupes will later pay for the steak. I prefer, Greg, when you actually get more combative with Ms. Fitts. Make America, great again and do so, in the name of the Lord Jesus Christ, Amen.

sell siliconvalley 19 hours ago

35 min: Fitts gives a great synopsis of the problem. She never deviates in all of her interviews. greg doesn't seem to understand at all. She repeats herself MULTIPLE TIMES and greg is still asking the same irrelevant PREPPER questions. IT DOES NOT MATTER WHAT ASSETS YOU HOLD GREG, AND THAT INCLUDES GOLD!!!! WHEN YOU'RE EXISTING IN A TYRANNICAL SYSTEM THAT STEALS AT WILL FROM ITS' CONSTITUENCY YOU CAN'T actually OWN ANYTHING!!!! lord! only so many ways to say

Andy Mak 17 hours ago

She lost credibility when she said Trump has "made a deal with the Bushes." That defies logic. The Bushes made a deal with Trump! Trump has gained full control of the military with a $ 1 1/2 trillion war chest. Trump and Putin are putting the China toothpaste back in the tube.

Karen Lydon 19 hours ago

This woman clearly knows nothing about the plan..she has not even mentioned that the world bank president has resigned who was appointed by obumma. And that is HUGE. She was in government in the corruption, but she doesn't know how things will be fixed..she's not in that loop of current things in the new reset..shes coming from her own perceptions

A T 20 hours ago

This woman always make me sick to my stomach. She comes out and says a bunch of scary stuff and offers no solution. If it's too much for just one person, then we the people need to take control. We don't need a central bank. We need local and state banks like the Bank of North Dakota then we can migrate over to them and then shut down the Fed.

[Jan 13, 2019] Mismatch of the USA refining capacities and the supply of oil in the market

Jan 13, 2019 | peakoilbarrel.com

Energy News x Ignored says: 01/12/2019 at 2:24 pm

2019-01-11 (Bloomberg) Saudi and Canadian cuts are leaving world hungry for heavy crude
Refiners along the Gulf Coast and in the Midwest invested billions of dollars in cokers and other heavy-oil processing units over the past three decades anticipating supplies of light oil would become scarce while heavy crude from Canada's oil sands, Venezuela and Mexico would grow. Instead, the opposite occurred.
The shale revolution, as well as new offshore supplies form Brazil and West Africa, caused a surge of light oil, while supplies from Venezuela to Mexico declined. Canada's growth has been stymied by delays in getting new pipelines built.
https://www.bnnbloomberg.ca/saudi-and-canadian-cuts-are-leaving-world-hungry-for-heavy-crude-1.1197259

[Jan 13, 2019] Indian consumption continues to grow

Jan 13, 2019 | peakoilbarrel.com

Energy News

x Ignored says: 01/11/2019 at 7:57 am
India – Consumption of Petroleum Products (Without LPG or PetCoke)(kt/day)
December 2018 up +7.01% higher than December 2017
Average full year 2018 up +6.80% higher than full year 2017
Chart https://pbs.twimg.com/media/DwoYp5xWsAA_vRh.jpg
India Light Distillates Consumption (shown in chart)
Average full year 2018 up +9.74% higher than full year 2017
Chart https://pbs.twimg.com/media/DwoY_yjX4AA-S9K.jpg
India Middle Distillates Consumption
Average full year 2018 up +3.92% higher than full year 2017
Energy News x Ignored says: 01/11/2019 at 3:51 pm
The increase in barrels is +220 kb/day year/year (without LPG or Petcoke)

2019-01-11 (Bloomberg) The International Energy Agency, which expects the country to be the fastest-growing oil consumer through 2040, cut its 2018 demand forecast for India at least two times. The agency estimated India's oil demand growth at 245,000 bpd in 2018 and 235,000 bpd in 2019.
https://www.worldoil.com/news/2019/1/11/india-oil-demand-rises-from-four-year-low-as-cash-ban-impact-fades